Shared Prosperity Vision 2030 Will Boost Malaysia As a Regional Economic Centre

ISBN 978-967-5842-19-1

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Released on 5 October 2019 Reprinted on 8 November 2019

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SHARED PROSPERITY VISION

RESTRUCTURING MALAYSIA'S DEVELOPMENT PRIORITIES

Foreword

We have faced many challenges and achieved many successes since independence over six decades ago. From a poor and colonised country, Malaysia has transformed into a fast-growing industrial country. The country has been regarded as an "Asian Tiger". Economic achievements, political stability and the wellbeing of the rakyat are often the benchmark for other developing countries.

By leveraging the resources available in our country, including the talent, skills and expertise of the rakyat in various fields, we have been able to drive the country's economic growth and improve the rakyat's income. With rapid development of the economy over the past six decades, Malaysia has now moved its position to be in the high-income category.

Our next aspiration is to see Malaysia become a harmonious and united nation with the country's prosperity being shared in a fair and equitable manner by all regardless of ethnicities, class or regional differences. Our country cannot be forever trapped in the middle-income category.

Now, Malaysia will adopt a new approach to strengthening our economic performance. The initiatives we will be introducing will ensure that the rakyat and the nation enjoy Shared Prosperity.

Over the past decade, the country's economic management has been radically entrenched towards premature liberalisation and this has led to the ambition of becoming a developed nation as envisaged in Vision 2020 not being fully realised. Nevertheless, being a high-income country does not guarantee fair and equitable distribution of wealth and income to the rakyat.

In reality, despite the increase in value of the gross domestic product (GDP) and the country's income, the benefit of the country's wealth cannot be enjoyed equally by all. This is due to the relatively constant increase in income without the significant increase in productivity, leading to the rising cost of goods and services, thus burdening the lower income group. As a result, the increase in the rakyat's income does not increase their purchasing power.

The economic model of the last decade is more focussed on increasing the national debt for the implementation of mega projects. The Labour Force Survey Report, Malaysia, 2018 also indicates that the number of semi-skilled and low-skilled workers is 72.8 percent of the total labour force in the country. Ownership of the country's equity is increasingly turning to foreign ownership. Economic growth, however, is focussed only on some of the country's major cities, sidelining the growth, equity ownership and opportunities for the rakyat in the rural areas.

The situation is deteriorating with the erosion of integrity and worsening corruption. As a result, the Government's delivery to the rakyat is becoming less effective, resulting in widespread leakages in public spending and abuse of power. The bottom 40% of household income group (B40), which is mainly the Bumiputera community, is among the most oppressed rakyat as a result of the culture of leakages and abuse of power in the previous Government. All Government policies, programmes and assistance targeted at them have been unsuccessful due to these leakages, corruption and abuse of power. Now, with various institutional reforms and improvements being put in place by the Government, I am confident that efforts to help the B40 group and the Bumiputera community as a whole will bear fruit as intended. The rakyat are hopeful that the Government will implement a new national economic plan to boost wealth creation so that they may enjoy the prosperity in a fair and equitable manner.

Global investors and markets also have high expectations of Malaysia maintaining political stability, free from kleptocracy and fully tapping its economic potential to achieve sustainable social wellbeing.

We have taken a new approach to the country's economic and social management where development and progress must be able to produce Shared Prosperity. In this context, the rakyat will be able to enjoy significant increase in household income and purchasing power, as income and wealth disparities between classes, ethnic groups, regions and supply chains are being reduced.

The wellbeing of the rakyat can also be ensured with a more conducive, safe and sustainable environment. Ultimately, people of various ethnicities and religious groups will have a peaceful and harmonious life in a democratic and stable country.

I am confident that with proper implementation of policies and strategies, Malaysia will thrive and develop more rapidly. The real measure of the country's progress and development is that the wealth generated can be distributed and enjoyed equally and equitably by all rakyat. The aim of the Shared Prosperity is to provide a decent standard of living to all Malaysians.

A harmonious and unified society, free from suspicion and prejudice and celebrating the diversity of races and cultures, is fundamental to the unity of the country.

I would like to take this opportunity to express the Government's appreciation and gratitude to Institut MASA for their efforts and commitment in preparing the Shared Prosperity Vision document.

I hope this document will become a platform for all Malaysians to work together and make this noble cause a reality.

TUN DR. MAHATHIR BIN MOHAMAD Prime Minister of Malaysia Putrajaya 5 October 2019 Preface

What grand agenda do we need to drive post-2020? Malaysia will continue to forge ahead by focussing on restructuring the priorities of socioeconomic development based on Shared Prosperity Vision. Over the next 10 years, emphasis will be placed on improving the purchasing power of the rakyat and bridging the income disparities among ethnicities, regions and supply chains. Fostering unity and stability within the framework of racial and cultural diversity is paramount.

While building a sustainable economy is essential for the wellbeing of the rakyat, development should not only be measured by GDP growth alone, but must also consider the social indicators and inclusive economic distribution.

Development with a clear and focus direction is key towards building a bright future for Malaysia. This is the commitment of the new Government of Malaysia. In order to ensure success, the emphasis is not solely on equitability of opportunities, but also on the principle of equitable outcome.

Through this Vision, the rakyat will enjoy the prosperity of the country in a fair, equitable and inclusive manner. This prosperity will only be achieved through continuous and earnest efforts. Increased economic growth should be accompanied by increases in household income, skills and professionalism, wages and salaries, savings and ownership of wealth as well as participation in entrepreneurship and businesses.

In short, this Vision is a continuation of Vision 2020 in the framework of the country's long-term plans. The essence is to fulfill the aspirations of the rakyat in order to achieve a decent standard of living.

I urge all Malaysians to unite and fulfill these aspirations. The unity in realising Shared Prosperity Vision 2030 will boost Malaysia as a regional economic centre.

The youth are the country's hope and the dawn of our future. Their aspiration today will be the reality of tomorrow and this can only be nourished and nurtured through noble values, good education and profound character building. With an unwavering sense of national identity and a strong determination to master technology, nothing is too high to be achieved.

MOHAMED AZMIN ALI Minister of Economic Affairs Putrajaya 5 October 2019 Introduction

Malaysia needs a new vision to chart the direction of economic development in order to achieve rapid and sustainable economic growth, fair, equitable and inclusive economic distribution to all the rakyat as well as building a nation state that is peaceful, prosperous and united.

With such direction and strategic planning, Shared Prosperity Vision 2030 will place Malaysia on the right track to achieve the targets. Through this vision, new economic sectors and areas will be identified and developed to drive the economy forward and create economic opportunities and high-income jobs for the rakyat. This vision will reduce the economic disparities between income groups, ethnicities, regions and supply chains, and ultimately make Malaysia a developed nation.

This vision is a continuation from Vision 2020 espoused by YAB Tun Dr Mahathir, Prime Minister of Malaysia, three decades ago to propel the country’s economic achievement, raise the standard of living of the rakyat and strengthen unity.

The main prerequisites for the success of Shared Prosperity Vision are the economic, political and social ecosystems to support rapid and sustainable economic growth. These include the implementation of policies and initiatives to encourage investment and trade in high growth sectors in order to generate income for the rakyat and the government, good governance based on integrity as well as social harmony to maintain peace and stability.

These factors will create a condusive environment to propel the country’s continuous economic growth so that the wealth and prosperity will be distributed fairly and equitably to all rakyat. Various programmes and initiatives will be implemented to increase the incomes of B40 household who are in dire need of Government assistance and support. Through this vision, the rakyat will enjoy a decent standard of living.

I believe that when the prosperity of the country is shared with all the rakyat, unity will be achieved. No section of the rakyat should be left behind or marginalised from the mainstream development.

Institut Masa Depan Malaysia was given the honour by the Government to work with the Ministry of Economic Affairs in developing the Shared Prosperity Vision 2030. A series of research and consultative sessions with various groups of experts and stakeholders were conducted since a year ago to identify the objectives, strategic thrusts and enablers of this vision. Ultimately, this is a document that will be a blueprint for the policies and direction of the Government for the next ten years.

I would like to take this opportunity to express my appreciation to everyone who has contributed in preparing the Shared Prosperity Vision 2030 document. InsyaAllah, with the commitment and efforts from all stakeholders in executing this vision, the country will march forward for a better and prosperous future for all.

MUHYIDDIN YASSIN Founder Institut Masa Depan Malaysia (MASA) Bukit Damansara 5 October 2019

Table of Contents

CHAPTER 5 5-01 EXECUTIVE Guiding Principles SUMMARY 5 Introduction GP1: Continuous Prosperity GP2: Equitable Outcome 1-01 CHAPTER 1 GP3: Equitable Growth Introduction GP4: Distributed Economy 1 Shared Prosperity Vision GP5: Inclusivity Outcome-Based Approach GP6: Learning Society GP7: Future Economy GP8: Needs-Based Approach CHAPTER 2 2-01 Economy Deﬁnition of Shared GP9: Institutional Political-Economy 2 Prosperity GP10: Integrated Social Model GP11: Economic Centre of Asia GP12: Democracy and Stability CHAPTER 3 3-01 GP13: Integrity and Good Nation State Governance GP14: Unity in Diversity 3 Fundamental of Nation State The Pillar of Nation State GP15: Sovereignty and Sustainability CHAPTER 4 4-01 Situational Analysis CHAPTER 6 6-01 4 Economic Restructuring Strategic Thrusts Pre-Mature Economic Liberalisation Introduction Approach and Impact 6 6-04 STRATEGIC THRUST 1 Economic Growth Potential Restructuring Business and Industry Regional Development Disparities Ecosystem

Disparity Between Income Groups 6-08 STRATEGIC THRUST 2 Disparity between Ethnic Groups Key Economic Growth Activities Economic Sabotage (KEGA) Summary of Situational Analysis 6-17 STRATEGIC THRUST 3 Transforming Human Capital

6-19 STRATEGIC THRUST 4 Strengthening the Labour Market and Increasing Compensation of Employees

6-22 STRATEGIC THRUST 5 Social Wellbeing

6-24 STRATEGIC THRUST 6 Regional Inclusion

6-29 STRATEGIC THRUST 7 Social Capital CHAPTER 7 7-01 CHAPTER 10 10-01 Enablers of Shared Polarity Management Prosperity 7 10 Target Groups B40, Poor and Economically 7-03 ENABLER 1 Vulnerable Fiscal Sustainability Community in Economic Transition 7-08 ENABLER 2 Indigenous Community Financial Capital Bumiputera in Sabah and Sarawak 7-10 ENABLER 3 Persons with Disabilities Effective Institutional Delivery Youth 7-11 ENABLER 4 Women Governance and Integrity Children 7-12 ENABLER 5 Senior citizens Education and Technical and Vocational Education and Training

7-14 ENABLER 6 11-01 Big Data CONCLUSION 7-16 ENABLER 7 Sustainability

7-18 ENABLER 8 Enlightened Society APPENDIX 12-01 Glossary of Abbreviations Glossary of Terms 8-01 CHAPTER 8 Shared Prosperity Vision Targets and Measures of Committee Chart 8 Shared Prosperity CHAPTER 9 9-01 9 Bumiputera Outcomes SHARED PROSPERITY VISION 2030

Shared Prosperity Vision 2030 is a commitment to make Malaysia a nation that achieves sustainable growth along with fair and equitable distribution, across income groups, ethnicities, regions and supply chains. The commitment is aimed at strengthening political stability, enhancing the nation’s prosperity and ensuring that the rakyat are united whilst celebrating ethnic and cultural diversity as the foundation of the nation state. AIM THE PRIMARY AIM OF THE SHARED PROSPERITY VISION IS TO PROVIDE A DECENT STANDARD OF LIVING TO ALL MALAYSIANS BY . FRAMEWORK OF SHARED PROSPERITY VISION 2030

GUIDING PRINCIPLES

Continuous Learning Economic Prosperity Society Centre of Asia

Equitable Future Democracy Outcome Economy & Stability

Needs-Based Integrity & Equitable Approach Good Growth Economy Governance

Unity in Distributed Institutional Diversity Economy Political-Economy

Integrated Sovereignty Inclusivity Social Model & Sustainability

ENABLERS

Fiscal Financial Effective Governance Sustainability Capital Institutional & Integrity Delivery

Education Big Data Sustainability Enlightened & TVET Society

0-01 B US AL IND IN PIT UST ES A RY S L C E & IA CO C SY SO S TE M

K E Y A E & C s C T u D O L ro e I n v V N A N e io e l I p t o T O N O f I s a o p I M o E O S r N r m I S A I U P d G e C , l L e l n ( E K d ﬁ G C SHARED i t R e E

R N t n

I i G

O g

n i PROSPERITY

D U

)

VISION T H

A d & dr h essi alt In ng We co ies L me arit A W S Disp T O I E P L C L I A B A C E L N IN A G M U H

LABOUR RKET & C MA ES OMP OYE ENSATION OF EMPL

GUIDING STRATEGIC OBJECTIVES ENABLERS PRINCIPLES THRUSTS

0-02 SHARED PROSPERITY VISION OBJECTIVES

0-03 DEVELOPMENT 1 FOR ALL Restructuring the economy to be more progressive, knowledge-based and high-valued with full community participation at all levels. Restructuring Economy

ADDRESSING WEALTH & 2 INCOME DISPARITIES

Addressing economic disparities across income groups, ethnicities, regions and supply chains to protect and empower the rakyat in ensuring that no one is left behind.

Addressing Inequalities

UNITED, PROSPEROUS & 3 DIGNIFIED NATION

Building Malaysia as a united, prosperous and digniﬁed nation and subsequently becoming an economic centre of Asia. Nation Building

0-04 E Executive Summary

The Shared Prosperity Vision as the country's new direction was announced by the Prime Minister during the tabling of the Mid-Term Review of the Eleventh Malaysia Plan (MTR 11MP) on 18 October 2018 in Parliament. Subsequently, the Shared Prosperity Vision's basic framework was detailed by the Prime Minister in the Keynote Address of Pakatan Harapan’s First Anniversary as the Government on 9 May 2019.

Shared Prosperity Vision is a commitment to make Malaysia a country that achieves sustainable economic growth along with fair, equitable and inclusive economic distribution, across all income groups, ethnicities, regions and supply chains. The emphasis is on the principle of equitable outcome rather than opportunities.

The Shared Prosperity Vision outlined three objectives, 15 guiding principles, seven strategic thrusts and eight enablers to realise the desired goals.

The aim of the Shared Prosperity Vision is to provide a decent standard of living to all Malaysians by 2030. In line with the Shared Prosperity Vision, the country needs to change its economic model and restructure the business ecosystem as well as to strengthen the existing policies and plans. The proposed changes in relation to labour market will involve workforce transformation to fulfill the need of high-paying jobs and high-value businesses. The transformation is expected to elevate the income of the rakyat to higher levels to remain relevant with the passage of time.

Economic strategies without social consideration will not guarantee the strength and vibrancy of the country. The strengthening of the country’s pillar, national identity and dignified people narratives are fundamental to fortify the nation state. The enablers of the Shared Prosperity Vision focus on social capital development, outcome-based education and awareness in creating an enlightened society to realise social cohesion and unity in diversity.

Shared Prosperity Vision sets clear and measurable goals and targets. The indicators developed to measure national development are not solely based on gross domestic

0-05 SHARED PROSPERITY VISION 2030 1 CHAPTER 1: Introduction

product (GDP) growth. Nevertheless, the measurement will also encompass distribution of national wealth, increase in purchasing power and enhance wellbeing to benefit the rakyat. The target of the Shared Prosperity Vision is more holistic as compared to that of the New Economic Policy (NEP) in the face of complex economy and dynamic social conditions. Key Result Indicator (KRI) will be used as a guide to effectively monitor and ensure the objectives and goals of the Shared Prosperity Vision are achieved.

Photographer: Iulian Pana 0-06 1 CHAPTER 1 Introduction Shared Prosperity Vision Outcome Based Approach CHAPTER 1 Introduction

In 2030, Malaysia is expected to have a population of 38 million people1. The increase in population is a challenge for economic expansion towards fulfilling the rakyat’s needs and maintaining the stability of country. However, determining an appropriate economic approach will pose a challenge for the Government to ensure that the country remains peaceful and prosperous with fair and equitable economic distribution, as well as inclusive.

At present, the progress and development of the socioeconomic status of the rakyat are measured based on achievements of economic indicators such as per capita income, gross domestic product (GDP) growth and incidence of poverty. In this regard, the Government is launching the Shared Prosperity Vision 2030; a more holistic approach in the face of a complex economy and dynamic social conditions. The measurement of achievement will encompass the distribution of national wealth, increasing purchasing power and enhancing the wellbeing to benefit the rakyat. The Shared Prosperity Vision covers three primary objectives:

Development for All 1 Restructuring the economy to be more progressive, knowledge-based and high-valued with full community participation at all levels;

Addressing Wealth and Income Disparities 2 Addressing economic disparities across income groups, ethnicities, regions and supply chains to protect and empower the rakyat in ensuring that no one is left behind; and

United, Prosperous and Digniﬁed Nation 3 Building Malaysia as a united, prosperous and dignified nation, and subsequently becoming an economic centre of Asia.

Malaysia Population Projection 2010-2040 1 1-01 (Updated 18 January 2013), Department of Statistics Malaysia. SHARED PROSPERITY VISION 2030 1 CHAPTER 1: Introduction

Based on three primary objectives, Shared Prosperity Vision will be further detailed by 15 guiding principles, seven strategic thrusts and reinforced by eight enablers.

Shared Prosperity Vision gives full emphasis on economic facts and current data as sound foundation for national development, without neglecting legal, social and community aspects. In summary, Shared Prosperity Vision is a new direction in the quest for a peaceful, harmonious and united Malaysia that propels the country's position as an important economic centre of Asia in 2030.

SHARED PROSPERITY VISION OUTCOME-BASED APPROACH

Shared Prosperity Vision emphasises on an inter-regional development disparities and outcome-based approach in formulating its improving rakyat's standard of living and policies and strategies. The emphasis is in wellbeing. line with the Government's aspiration to prioritise the country's success through more In general, Shared Prosperity Vision effective resource management and high encompasses all aspects of physical value investments. achievements including infrastructure, the economy and administrative system as well Malaysia needs to reprioritise the indicators as social aspects such as environmental, in measuring the outcome of socioeconomic societal values and education. The development. The prioritisation of these implementation, monitoring and measuring indicators is crucial as previous process will be undertaken through a more measurements have been more focussed on detailed and dynamic dashboard. The the provision of initiatives, programmes and implementation will be continued periodically activities with attention on participation and in the Twelfth Malaysia Plan (12MP) and publicity. The previous indicators have given Thirteenth Malaysia Plan (13MP). prominence to output rather than outcome. Key outcome indicators cover increasing the income, creating high-paying jobs, reducing

1-02

CHAPTER 2 Deﬁnition Of Shared Prosperity CHAPTER 2 Deﬁnition Of Shared Prosperity

Globally, "Shared Prosperity" is not a new term and has been used on many platforms for various purposes. The World Bank emphasised this agenda and defined the term "Shared Prosperity"1 as:

“...two key elements, economic growth and equity, and it will seek to foster income growth among the bottom 40 percent of a country’s population. Without sustained economic growth, poor people are unlikely to increase their living standards. But growth is not enough by itself. Improvement in the Shared Prosperity Indicator requires growth to be inclusive of the less well-off.”

The statement on shared prosperity as articulated by Joseph E. Stiglitz2 in his book The EURO: How a Common Currency Threatens the Future of Europe, 2016, bears analysis:

"A true growth and stability agenda interacts strongly with other elements of the reform agenda: the only sustainable prosperity is shared prosperity."

The United Nations Industrial Development Organization (UNIDO) defines "Shared Prosperity" in its development strategy as:

“…a strategy for sustained growth must ensure a form of industrialization that makes opportunities accessible to all people and broadly distributes income and non-income gains across society. The inability of countries to fully integrate solutions to social issues into targeted industrial and economic policies undermines the developmental potential of industry, thus widening income inequality gaps.” 3

Definition by Jaime Saavedra-Chanduvi in the article “Shared Prosperity: A New Goal for a 1 Changing World”, World Bank, 8 May 2013. 2-01 Joseph E. Stiglitz is a professor at Columbia University and Nobel Economic Prize Winner, 2001. 2 Based on UNIDO Framework Inclusive and Sustainable Industrial Development (ISID). 3 SHARED PROSPERITY VISION 2030 2 CHAPTER 2: Deﬁnition Of Shared Prosperity

The basis of these definitions are the same, which discuss imbalance development and widening economic disparity. The situation calls for various measures and strategies to address these challenges.

Shared Prosperity Vision is therefore defined by the following:

The primary aim of Shared Prosperity Vision is to provide a decent standard of living to all Malaysians by 2030.

Based on this definition, some elements are further elaborated. The “Shared Prosperity” that is to be achieved through a continuous commitment will be supported by "...a nation that achieves sustainable growth...". Any economic achievements resulting from Shared Prosperity Vision will be retained to ensure sustainability. This definition means that the consideration of the initiatives and plans will be shaped to align with long-term goals and entails meaningful change.

Furthermore, "...with fair and equitable distribution, across income groups..." underlines the Government's responsibility to create an inclusive and equitable economic system. Fair economic distribution stream will reduce the income disparity between business communities and household groups.

2-02 Sociopolitical elements in Shared Prosperity Vision are reflected in "...strengthening political stability, enhancing the nation’s prosperity and ensuring that the rakyat are united...". These elements are the results from realised economic prosperity, empowered democratic institutions and enhanced social bonds embedded within the Shared Prosperity Vision framework.

Furthermore, "...celebrating ethnic and cultural diversity as the foundation of the nation state..." is a continuous effort to build a united country while taking into account ethnic, cultural and religious differences. The strengthening of Malaysian identity as a plural society must continue to be prioritised.

The Shared Prosperity Vision also upholds the responsibility to ensure the wellbeing of Malaysians via "The primary aim of the Shared Prosperity Vision is to provide a decent standard of living to all Malaysians by 2030." A decent standard of living is defined by providing three elements in the rakyat’s life:

1 financially sufficient to meet basic needs; 11 capability to participate in community, family and social activities; and 111 ability to lead a meaningful and dignified life.

A decent standard of living will take into account the income of the rakyat based on expenditures, income classes and localities that differ from one another. The determination of a decent standard of living will guide each individual, worker, employer and Government to evaluate and develop programmes to improve the socioeconomic status of the rakyat (social mobility).

2-03 SHARED PROSPERITY VISION 2030 2 CHAPTER 2: Deﬁnition Of Shared Prosperity

OVERVIEW OF SHARED PROSPERITY VISION

1 To ensure sustainable economic development; To achieve sustainable growth with a fair, equitable and 11 inclusive economic distribution;

To expand the economy and economic opportunities based on 111 Key Economic Growth Activities (KEGA); 1v To address the widening income and wealth disparities;

To eliminate poverty and manage the bottom 40% (B40) v households including the vulnerable and marginalised groups; v1 To establish a united society free of prejudice.

2-04

CHAPTER 3 Nation State CHAPTER 3 Nation State

The awareness and acceptance of the rakyat on the fundamentals that make up a country's background is a key prerequisite for building a harmonious and prosperous nation. Understanding, respect and responsibility for the history of the country can be nurtured when good governance policies are implemented including educating the rakyat to be aware of some of the components that make up Malaysia as a nation1. A society that is committed to the nation's foundations is a society that understands, respects, and is responsible for ensuring that Malaysia will continue to develop in a sustainable manner with a fair, equitable and inclusive economic distribution for all.

FUNDAMENTALS OF NATION STATE

Malaysia is an independent sovereign state. It upholds the principle of ‘strength through is a nation comprising a group of people cultural and ethnic diversity’ as a national united under a common banner founded on asset. ethnic, cultural and historical sharing. As a nation state, the people are united under a In this regard, the formation of a nation state single identity and will defend its political and must take into account longue durée or territorial boundaries2. long-term historical structures5, particularly in identifying the form of ethnic symbolism that In the sociological context, a nation state may constitutes its pillar6. The longue durée be viewed in several categories depending on perspective is important in understanding how the emphasis given to the formulation of the formulation of ethnicity has been taken into ethnicity3. Unlike the concept of account in devising policies of the nation Settler-Migrant Nation, Malaysia is a Host state6. Nation State which adopts the process of integration—not assimilation—to achieve national harmony, stability and progress4, and

Abd Razak, M.R. Pembinaan Negara Bangsa Malaysia: Peranan Pendidikan Sejarah dan Dasar 1 3-01 Pendidikan Kebangsaan. JEBAT 36 (2009) pp 90-106. Delanty, G. Beyond the Nation-State: National Identity and Citizenship in a Multicultural 2 Society - A Response to Rex. British Sociological Association Sociology Journal (1.3) pp 1-8. SHARED PROSPERITY VISION 2030 3 CHAPTER 3: Nation State

3 Convesi, D. (ed) 2002, Ethnonationalism in the Contemporary World: Walker Connor Study of Nationalism. New York: Routledge. 4 Ozkrimili, U. 2017, Theories of Nationalism: a Critical Introduction, London: Palgrave. 5 Malesevis, S. 2018, Nationalism and Longue Duree, Nations and Nationalism, 24(2):292-299. 3-02 6 Tang Abdullah, A. R. & Wan Hassan, W. S. Elemen Sejarah dalam Pembentukan Negara: Kemunculan Negara Bangsa di Eropah dan Proses Kolonialisasi dan Dekolonialisasi dalam Konteks Malaysia, Jurnal Perspektif. (7.1). pp 57-71. Photographer: Larm Rmah THE PILLAR OF NATION STATE

In Malaysia, the formation of the national agreed upon as the grundnorm or basic rules pillar had taken into account native ethnic of the country. culture of the Federation of Malay States during the process of independence in In this integration nation state, the country’s 19577. The pillar of the nation was embedded administration and development is based on within the terms agreed upon in the a process of reciprocity or power sharing Federation of Malay States Agreement 1948. between various ethnics8, as stated in the These terms formed a basis for the Federal Constitution. This power sharing formulation of the Constitution of the consensus directly formed an independent Federation of Malaya 1957. With the state that embraces cultural and ethnic recognition given to symbolism of Malay diversity rooted in the pillar of nation state. ethnic as native in Malaysia, these terms have been these terms have been collectively

Among the grundnorm agreed upon in forming the platform of integration is the adoption of several fundamentals in the Federal Constitution, namely9:

1 Islam is the religion of the Federation; but other religions may be practised in peace and harmony in any part of the Federation (Article 3 (1));

11 The national language shall be the Malay language, but the native languages of other ethnicities can still be taught and used (Article 152 (1)); 111 The special status of the Malays and the natives of Sabah and Sarawak is recognised, but the interests of other communities are also protected (Article 153); 1v The sovereignty of the Malay Rulers (Article 181); and v Citizenship rights are granted to those who are eligible under the Federal Constitution (Part III).

Gullick, J. M. 1964, Malaya, London: Ernest Benn; Roff, William R. 1980, The Origins of Malay 7 Nationalism, Kuala: Penerbit Universiti Malaya. Abdul Rahman Embong. 2007, Rethinking Ethnicity and Nation-Building: Malaysia, Sri Lanka 8 3-03 and Fiji In Comparative Perspective, Kuala Lumpur: Persatuan Sains Sosial Malaysia; Smith, A.D. 2009, Ethno-Symbolism and Nationalism. London: Routledge. Abdul Rahman Embong. 2006, Negara Bangsa: Proses dan Perbahasan. Edisi Ke 2. Bangi: 9 Universiti Kebangsaan Malaysia. SHARED PROSPERITY VISION 2030 3 CHAPTER 3: Nation State

In Malaysia, apart from the provisions agreed upon through the principles of reciprocity and recognised in the Federal Constitution, citizens are also taught to respect the principles and objectives of the Rukun Negara, introduced in 1970 to promote unity and strengthen the nation state10.

The Pillars of the State set several key objectives:

4 Guarantees openness to its 2 Maintain a rich diverse democratic way multi-cultural of life traditions

3 5 1 Achieve Create a just Build a greater unity society where progressive among whole the prosperity of society that will society the country can make use of be enjoyed fairly modern science and justly and technology

The Pillars of the State principle mentions:

Belief in God

Loyalty to King and Country

Supremacy of the Constitution

Rule of Law

Good Behaviour and Morality

Since 1970, various economic policies and models have been introduced to reduce the socioeconomic disparities among the rakyat by instituting a more inclusive socioeconomic development platform. The Shared Prosperity Vision is a continuation of such policies and models that represent the cornerstone of national development to date as shown in Figure 3.0.

10 Abdul Aziz, A. R. Rukun Negara dan Memperkukuhkan Ketahanan Negara. Political Managements and Policies in Malaysia. pp. 443-457; Rustam A Sani 1994, Melayu Baru dan 3-04 Bangsa Malaysia. Kuala Lumpur: Utusan Publication. MALAYSIA DEVELOPMENT HISTORY

1957 Malaya Independence 1948 and the Introduction of 2MP | 3MP the 1957 Malay Adopting the 4MP | 5MP Constitution that stresses Constitution of the Growth with the principle of social Federation of Equitability Malaya as a national contract independence document 1963 Diversifying the The entry of Sabah National and Sarawak and the Economy formation of Malaysia through the Malaysia Agreement 1963

1948- 1971- 1986 1970 1990

First Malaya Plan New National Second Malaya Plan Economic Industrial Policy Policy First Malaysia Plan (1MP)

1970 The introduction of the Rukun Negara (National Pillars) and the New Economic Policy as a measure of national recovery after the events of May 13, 1969

3-05 SHARED PROSPERITY VISION 2030 3 CHAPTER 3: Nation State

National Transformation National Policy Shared Development 10MP Policy Prosperity 11MP Vision MP 6 New 12MP | 13MP MP Economic 7 Restructuring the Model Balanced Developmental Priorities Development of Malaysia

1991- 2001- 2011- 2021- 2000 2010 2020 2030

National Vision Policy CPA 8MP MP 9MP 11 A country that is 2018-2020 resilient and New Emphasis competitive and Priorities

VISION 2020, 1991-2020

Comprehensive Development

3-06 4 CHAPTER 4 Situational Analysis

Economic Restructuring Pre-Mature Economic Liberalisation Approach and Impact Economic Growth Potential Regional Development Disparities Disparity Between Income Groups Disparity Between Ethnic Groups Economic Sabotage Summary of Situational Analysis CHAPTER 4 Situational Analysis

ECONOMIC RESTRUCTURING

Malaysia has experienced various phases of development to reach the current level. 1 The ethnic-based economic pattern that has been shaped since the colonial period has led to social conflicts among the rakyat. Subsequently, economic restructuring through the New Economic Policy (NEP) was introduced to restructure the society and continuously expand the economy so as to ensure that social conflicts do not recur.

The NEP has restored confidence and understanding among ethnic groups and 2 created various opportunities for economic participation. Among the successes of the NEP are reducing hardcore poverty, increasing household income, restructuring of society and reducing ethnic group identification based on economic activities and enhancing political stability. Nonetheless, the target of at least 30% Bumiputera equity ownership has not been met.

The economic restructuring measures continue to be implemented in shifting the 3 country's focus from the agricultural to the industrial sector through the implementation of the national industrial policy and the introduction of Vision 2020. Several policies have been introduced including the National Development Policy (1991-2000), the National Vision Policy (2001-2010) and the National Transformation Policy (2011-2020).

During the implementation period of the economic restructuring policy, various 4 initiatives were executed. Among the significant achievements are: propelling Malaysia into a technological country with the establishment of the 4.1 Multimedia Super Corridor (MSC) and Multimedia Development Corporation Sdn. Bhd. (MDEC), now known as Malaysia Digital Economy Corporation Sdn. Bhd.;

4.2 establishing the local automotive industry through the implementation of the National Automotive Policy and the establishment of Perusahaan Otomobil Nasional (PROTON) in 1983 and Perusahaan Otomobil Kedua (PERODUA) in 1993;

4-01 SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

4.3 shifting the nation’s labour force from no formal education to tertiary education as shown in Figure 4.0;

Percentage of Labour Force by Educational 4.0 Attainment, 1982–2018

Rate of Labour Force, %

30 29

20 16

10 6

5 3

0 '82 '83 '84 '85 '86 '87 '88 '89 '90 '92 '93 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Tertiary

No formal Education

Source for Figure 4.0: Department of Statistics Malaysia 4-02 4.4 increasing the level of skilled labour force as shown in Figure 4.1;

Percentage of Labour Force by 4.1 Skill Category, 1982-2018

Share of Labour Force, % 100

0 '82 '83 '84 '85 '86 '87 '88 '89 '90 '92 '93 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Skilled Semi-Skilled Low-Skilled

4.5 reducing poverty rate from 20.7% in 1984 to less than 0.4% in 2016;

increasing access to infrastructure facilities as well as transportation networks 4.6 and connectivity, which support economic expansion;

accelerating the country's GDP growth rate up to the level of Newly 4.7 Industrialised Countries in Asia (Asian Tigers) with an average growth rate of 9.6% per annum in the period of 1991 - 1996; and

addressing the 1997/98 Asian financial crisis through selected capital control 4.8 instruments, which was later recognised by the International Monetary Fund (IMF).

Source for Figure 4.1: Department of 4-03 Statistics Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Malaysia was also affected by regional and global economic crises such as those in 5 2001 and 2008, which demanded a more holistic reprioritisation in economic development. The Government will continue to undertake measures to restructure the economy towards shared prosperity.

Photographer: Ling Tang 4-04 PRE-MATURE ECONOMIC LIBERALISATION APPROACH AND IMPACT

Malaysia has implemented gradual economic liberalisation measures over the past three decades. Interest rate liberalisation measures were implemented during the 6 period of 1978-1985 and 1991-1998. Malaysia also exercised capital market liberalisation in 1990 and tight monetary and fiscal policies in 1997. The liberalisation process was conducted in stages based on the country’s needs.

However, over the past two decades, specifically since 2009, Malaysia had begun to liberalise the economy more broadly including moving away from the manufacturing to services sector. The Government at that time headed towards a high-income nation without taking into account the 2013 exchange rate condition, purchasing power parity and the influx of illegal immigrants.

6.1 Liberalisation measures were taken in the areas of trade and investment, services, Government procurement and state-owned enterprises (SOEs). The pre-mature liberalisation measures undertaken included the dissolution of the Foreign Investment Committee (FIC), relaxation of foreign equity ownership of up to 100% in business services, insurance, wholesale and retail as well as tariff reduction.

Malaysia is in the midst of reviewing the terms and conditions of the 6.2 Comprehensive and Progressive Agreements for Trans-Pacific Partnerships (CPTPP). Some policies and legislations were reenacted according to the agreement. The role of SOEs and Small and Medium Enterprise (SMEs) as well as Government procurement need to be aligned to Shared Prosperity Vision. The view is that local SOEs are more competitive than foreign conglomerates and that pre-mature liberalisation measures need to be re-evaluated. There is also the concern that over reliance on huge foreign investors may run the risk of the country's potential in strategic and new industries being controlled by foreigners. Thus, re-evaluation is necessary to ensure continued growth in the local industry so that the prosperity generated will benefit the rakyat.

4-05 SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

ECONOMIC GROWTH POTENTIAL

GDP performance. The East Asia and Pacific GDP growth remained high despite the 7 financial crisis in 2008-2009. However, Malaysia's GDP grew moderately as compared to the East Asia and Pacific region since 2001 as shown in Figure 4.2.

GDP by Selected Countries and Regions, 4.2 2000-2018

Real GDP, %

-3

-6 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Malaysia Latin America and Caribbean East Asia & Paciﬁc (excluding high income nation) Europe and Middle East (excluding high income nation) People's Republic of China

Source for Figure 4.2: Department of 4-06 Statistics Malaysia and World Bank In spite of a generally favourable trade balance during the period of 2010-2018, the 8 numbers achieved show that Malaysia did not fully realise its economic potential. In addition, the growth of the trade balance fluctuated as a result of the changes in the import-export value, between 20% and -25% as shown in Figure 4.3.

GDP Growth Rate and Trade Balance, 4.3 2010-2018

Trade Balance Real GDP Growth, % Growth, %

40 8.0

30 6.0

20 4.0

10 2.0

0 0

-10 -2.0

-20 -4.0

-30 -6.0

-40 -8.0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Trade Balance Growth Economic Growth

Source for Figure 4.3: Department of 4-07 Statistics Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

In terms of competitive advantage, Malaysia is no longer dependent on conventional 9 production factors such as labour, land and natural resources but is transitioning towards a knowledge-based economy. Knowledge creation and dissemination activities have the ability to enhance the country's competitiveness in generating higher value to the economy.

Investments in Malaysia continued to register strong growth with a contribution to the GDP of almost 25% in 2018. The growth in private investment was stronger as demand for higher capital expenditure was contributed by stable Foreign Direct Investment (FDI) inflows and the implementation of new and existing projects especially in the manufacturing and services sectors. Private investment increased by an average of 7.1% per annum from RM82.2 billion in 2000 to RM235.3 billion in 2018.

Despite the encouraging investment growth, there has been a significant decline in the investment of information and communications technology equipment as well as other machinery and equipment. Investments in equipment accounted for just 20.9% of gross fixed capital formation (GFCF) growth in 2018 compared to 26% in 2010, while investment in structure increased from 48.2% to 58.6% over the same period. In addition, expenditure on research and development (R&D) to GDP was still lower than other countries as shown in Figure 4.4. This has impeded the widespread adoption of advanced technology and automation by industry as well as limited innovation and productivity improvements.

4-08 R&D Expenditure to GDP 2016 4.4

R&D Expenditure, %

5 4.2

3.8 3.5 3.1

2.5 2.1 2.0 1.4 1.3

0 South Japan Taiwan Singapore People's Malaysia Korea Republic of China

Malaysia managed to attract net inflows of FDI worth RM505.6 billion for the period 10 of 1998-2018 or RM24.1 billion a year as shown in Figure 4.5. Gross FDI net growth of just 2.9% per annum over the same period was contributed by the services, manufacturing and mining sectors.

Source for Figure 4.4: Ministry of Energy, 4-09 Science, Technology, Environment and Climate Change; and World Bank SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Net Flow of Foreign Direct Investment, 4.5 (RM billion)

RM, billion

50 47

39 40 37 38 40 36 33 30 29 29 30 24 22

20 18 15 14 15 12 11 9 10 5 2

0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

However, based on investment data by the Malaysian Investment Development 11 Authority (MIDA), the approved FDI in three high-value manufacturing subsectors has decreased from 50.3% in 2010 to 27.7% in 2018. Investments in these subsectors include electrical and electronics by 18.5 % of total approvals, chemicals by 7.6% and machinery and equipment by 1.6% in 2018. These three subsectors have been identified as catalysts for growth, and are strongly linked to other manufacturing subsectors with the potential to produce more complex and high value-added products.

As shown in Figure 4.6, for the period 2010-2017, returns on direct investment abroad (DIA) had not increased and was lower than foreign investment. Companies investing abroad only brought in about 50% DIA. Therefore, strengthening of existing programmes and outsourcing activities need to be intensified to ensure FDI and returns on DIA create a spillover effect to the development of the local supply chain.

Source for Figure 4.5: Department of Statistics Malaysia 4-10 Direct Investment Returns 2010-2017 (%) 4.6 and R&D Expenditure on Output 2012 and 2014

Overall Value 5.2 12.6

Agriculture 3.2 5.7

Construction 0.7 6.8

Services 3.7 10.0

Manufacturing 4.0 13.8

Mining 9.5 Direct 25.5 Investment Returns, % 0 5 10 15 20 25

DIA FDI

Reliance on petroleum and gas-based commodities. The reliance on petro- 12 leum and gas products may pose risks to the economy due to price volatility and may contribute to economic downturn. As Figure 4.7 shows, in 1998, the percentage of petroleum and gas products from total exports was only 6% before finally increasing to 15.5% in 2018.

Source for Figure 4.6: 4-11 Bank Negara Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Photographer: Worksite Ltd 4-12 Export Values of Main Products, 4.7 1989, 1998 and 2018

YEAR 1989

Manufactured Mining Agriculture Others Goods Goods Goods

Miscellaneous Mineral Fuel, Transactions & YEAR Lubricants & etc. Food Commodities Beverages 1998 & Tobacco

Animals Chemicals & Vegetable Oils & Fats Machinery Manufactured Miscellaneous Crude & Transport Goods Manufactured Material, Equipment Articles Inedible

Mineral Fuel, Animals Chemicals Lubricants & etc. & Vegetable Crude Oils & Fats Material, YEAR Inedible 2018

Beverages & Tobacco

Machinery Manufactured Miscellaneous Food Miscellaneous & Transport Goods Manufactured Transactions & Equipment Articles Commodities

4-13 SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Total:

67.8billion

286.6billion

1,003.6billion

Source for Figure 4.7; Department of Statistic Malaysia 4-14 Value-added and low technology industries. The conventional manufacturing 13 industry is exposed to the risk of obsolescence due to the effects of the Fourth Industrial Revolution (4IR). Technological changes towards automation in complex manufacturing processes, development of 3D printing and artificial intelligence (AI) will reduce production costs and increase productivity. The application of high technology in manufacturing and services industries remain low at the rate of 37% and 20% respectively as shown in Figure 4.8.

Technology Application Rate in Manufacturing 4.8 and Services Sector, 2018

Technology Application Rate, %

90 80 80

70 63 60

50 37 40

30 20 20

0 Low and Medium High

Manufacturing Services

Source for Figure 4.8: Department of Statistics Malaysia, 4-15 United Nations Industrial Development Organisation and analysis by Institut MASA SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Premature deindustrialisation has taken place in Malaysia for the past 20 years. The 14 rate of high technology use in the manufacturing sector reached its peak of 52% in 1999. This rate subsequently declined to 32% by 2010 as shown in Figure 4.9.

Rate of Technology Adoption in Output of 4.9 Manufacturing Sector, 1987-2015

Rate of technology adoption, %

0 1987 1989 1991 1993 1995 1997 2000 2002 2004 2006 2008 2010 2014

Low Technology Medium Technology High Technology

Source for Figure 4.9: Department of Statistics Malaysia, United Nations Industrial Development 4-16 Organisation and analysis by MASA Compensation of employees to GDP is still low. The share of compensation of 15 employees (CE) to GDP, which is the income earned by the employees increased from 31.7% in 2010 to 35.7% in 2018. During the same period, the gross operating surplus, which included capital owner income and mixed income decreased from 64.6% to 61.0% as shown in Figure 4.10.

Compensation of Employees to GDP, 4.10 2010-2018

Component of GDP based on income approach, %

70 64.6 65.5 64.9 64.0 62.8 61.0 60 60.2 59.3 59.8

40 35.6 35.5 35.7 33.2 33.9 34.3 35.0 31.7 32.1 30

10 4.7 5.2 4.7 3.4 3.7 2.5 1.8 2.0 3.0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Employee compensation Excessive operating surplus Taxes minus subsidies on production and imports

Note : Data from 2010 to 2014 is based on 2017 publication and data from 2015 to 2018 is based on 2018 publication

Source for Figure 4.10: Department of Statistics 4-17 Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

As shown in Figure 4.11, Malaysia's CE to GDP remains low compared to developed 16 countries such as Germany at 51.5%, the United Kingdom at 49.4%, Australia at 47.2%, South Korea at 45.7% and Singapore at 39.7% in 2018.

Rajah Compensation of Employees to GDP, 4.114.9 2018

Compensation of Employees, % (2018)

60 51.5 49.4 50 47.2 45.7 39.7 40 35.7

0 Germany United Australia South Singapore Malaysia Kingdom Korea

Source for Figure 4.11: Department of Statistics Malaysia, OECD, South Korea and Singapore data 4-18 Based on the Bank Negara Malaysia Annual Report 2017, employee salaries in 17 Malaysia are not commensurate with labour productivity being on average at USD340. This is much lower compared to countries such as the United States, Australia, Germany, Singapore and the United Kingdom where the average salary was USD510 for every USD1,000 of output.

Among the key factors contributing to low salaries are the continuous domination of low-skilled and semi-skilled workers in the labour market and industry structure of the 18 country. Based on the Labour Force Survey (LFS) Malaysia 2018, Department of Statistics Malaysia (DOSM), these groups represent 72.8% of the total workforce involving four employment categories, namely, employer, employee, own account worker and unpaid family worker. However, DOSM's Income and Wages Survey Report 2017, which only measures the income and wages of full-time employees, shows that the percentage of low- and semi-skilled workers is at 63.2% from total labour force with an average salary and wage of less than RM1,947 per month.

In addition, the influx of foreign workers supressed the wage rates in the labour 19 market. Sectors that are highly dependent on foreign labour such as agriculture, manufacturing and construction pay an average salary and wage of RM2,434 per month, compared to the services sector with the average salary and wage of RM3,024 per month in 2017.

The distribution of low corporate profits to employees contributes to the difficulties in 20 managing finances and accumulating wealth among the labour force. The highly affected group is the B40 due to insufficient income to cover the cost of living as most of them are involved in low-paying jobs and small businesses. This group is more vulnerable to economic and financial crises due to inadequate savings and high indebtedness as shown in Figure 4.12.

4-19 SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Constraints of Vulnerable 4.12 Household Groups

75% 50% 50%

Rakyat Malaysia of households earning less than workers in Malaysia earning insucient to provide RM5,228 a month is proposed for below RM2,000 (2016) and RM1,000 during a Decent Living Wage: RM6,500 RM2,160 (2017) emergencies (for families of 4 in FT Kuala Lumpur)

35.7% (2018) 3 MILLION

the national income is from out of 14.5 million The majority of Malaysians the compensation of wages employees have will run out of money in a and salary to employees retirement money weeks time if their source of income is lost

Source for Figure 4.12: Department of Statistics Malaysia, Bank Negara Malaysia and Employees Provident Fund 4-20 As shown in Figure 4.13, Malaysia’s labour market also faced issues of low labour 21 productivity growth which registered a rate of 2.5% annually for the period of 2011-2016 compared to 3.2% for the period of 1985-1996. The slow growth was due to the rising number of workers and the low use of machinery because labour intensive industries relied more on foreign workers.

Percentage of Labour Productivity Growth 4.13 1985-1996, 2000-2007, 2011-2016

Productivity Growth, %

4.5% 3.9 4.0% 3.6 3.5%

3.0% 2.5 2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 1985-1996 2000-2007 2011-2016

Source for Figure 4.13: Khazanah Research 4-21 Institute and analysis by Institut MASA SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

REGIONAL DEVELOPMENT DISPARITIES

Planning and development strategy in the country for the previous years had been 22 concentrated in Federal Territory (FT) of Kuala Lumpur, Selangor, Johor and Pulau Pinang. In 2018, FT of Kuala Lumpur and Selangor contributed close to 40% to GDP as compared to other five states namely Kelantan (1.8%), Kedah (3.3%), Pahang (4.1%), Sabah (6.2%) and Sarawak (9.7%) as highlighted in Figure 4.14. The concentration of economic development of the FT of Kuala Lumpur and Selangor has widened the development disparities between states.

Share of States to National GDP, 4.14 2018

Contribution to GDP, %

45 40 40

30 25 25

0 FT Kuala Lumpur 5 States; and Selangor Kelantan, Kedah, Pahang, Sabah and Sarawak

1 Selection of states are based on the criteria of low per capita in 2018 and low average household income in 2016 as well as low GDP contribution compared to its land area in 2018 4-22 Source for Figure 4.14: Department of Statistics Malaysia The average household income in FT of Kuala Lumpur and Selangor state of RM9,974 23 per month is higher than five states1, namely Kedah, Kelantan, Pahang, Sabah and Sarawak, which have an average household income of less than RM5,500 per month being the lowest in Malaysia as shown in Figure 4.15. In addition, concentrated development planning has widened the median household income disparities among states in 2016.

Average Household Income in Selected States, 4.15 2016

Kelantan RM4,214

Kedah RM4,971

Pahang RM5,012

Sabah RM5,354

Sarawak RM5,387

Selangor RM9,463

FT Kuala RM11,692 Lumpur Household Income, RM

RM0 RM2,000 RM4,000 RM6,000 RM8,000 RM10,000 RM12,000

Selection of states are based on the criteria of low income per capita in 2018 1 4-23 and low average household income in 2016 as well as low GDP contribution compared to its land area in 2018. Source for Figure 4.15; Department of Statistic Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

As indicated in Figure 4.16, Johor, Kedah, Kelantan, Melaka, Negeri Sembilan, Sabah 24 and Sarawak as well as FT of Labuan showed an increase in percentage of household income which was less than half of the national median income, reflecting a continuous widening disparity.

Percentage Household with Income Less Than 4.16 Half the Median National Income by States, 2014 and 2016

Household Income, %

45%

39 40% 38

35%

29 27 30% 27 26 25 25% 24 24 24 24 22 20 21 20% 19 18 16 16 15% 15 12 12 12 11 9 9 10% 8 8 7 5 5% 4 2 2 1 0 0%

FT KL Perlis Johor Sabah Kedah Perak Melaka Pahang Putrajaya Selangor Malaysia Sarawak Kelantan FT Labuan N. SembilanTerengganu Pulau Pinang

2014 2016

Source for Figure 4.16: Department of Statistics Malaysia and analysis by Institut MASA 4-24 Development programmes that are concentrated in urban areas and undistributed 25 economic opportunities have resulted in the widening of the urban-rural economic disparity. As shown in Figure 4.17, the disparity in household income between urban and rural areas increased from RM419 in 1998 to RM2,389 in 2016.

Median Household Income Disparities Value 4.17 between Urban and Rural, 1989-2016

Median Household Income Gap between Urban and Rural, RM 2,389 2,400

2,033 1,866 1,800 1,599 1,435 1,293 1,200 1,081 997 838

600 419

0 1989 1995 1997 1999 2002 2007 2009 2012 2014 2016

Source for Figure 4.17: 4-25 Department of Statistics Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

DISPARITY BETWEEN INCOME GROUPS

There is a significant median monthly income disparity between top 20% of household 26 income group (T20) and B40 which has widened over the past 27 years. In 1989, the median monthly income disparity between the T20 and B40 groups amounted to RM1,935 and rose to RM10,148 in 2016 as shown in Figure 4.18.

Average Household Income Disparity between 4.18 T20-B40 Groups

Median Monthly Household Income, RM

14,000 13,148

12,000 11,610

10,000 9,796

8,009 8,000

6,000 4,957

4,000 2,368 2,000 3,000 2,629 1,853 433 874 1,440 0 1989 1999 2009 2012 2014 2016

Gap T20-B40 Income Gap Gap T20-B40 1989: RM1,935 T20-B40 2016: RM10,148

Household Income Group T20 Household Income Group B40

Source for Figure 4.18: Department of Statistics Malaysia and analysis by 4-26 Institut MASA DISPARITY BETWEEN ETHNIC GROUPS

The median monthly household income disparity between Bumiputera and Chinese 27 ethnic groups in 1989 was RM497. In 2016, the disparity increased almost four-fold to RM1,736 as shown in Figure 4.19.

Median Income Disparity between Bumiputera and Chinese Ethnic Household Groups, 4.19 1989-2016

Median Monthly Household Income, RM

7,000 6,582

6,000 5,708

5,000 4,643

3,643 4,000 4,846 4,214 3,000 2,486 3,282 2,000 1,176 2,534

1,000 1,423 679 0 1989 1999 2009 2012 2014 2016

1989: Bumiputera-Chinese 2016: RM497 Income Gap RM1,736

Chinese Household Income

Bumiputera Household Income

Source for Figure 4.19: 4-27 Department of Statistics Malaysia SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

During the same period, the median monthly household income disparity between the 28 Indians and Chinese ethnic groups also widened by four-fold from RM286 to RM1,154 as shown in Figure 4.20.

Value of median household Income Disparities by Indian and Chinese Ethnic Groups, 4.20 1989-2016

Median Monthly Household Income, RM

7,000 6,582

6,000 5,708

5,000 4,643 5,428 4,000 3,643 4,627 3,000 2,486 3,676

2,000 2,853 1,176 1,969 1,000 890 0 1989 1999 2009 2012 2014 2016

1989: Indian-Chinese 2016: RM286 Household Income RM1,154

Chinese Household Income

Indian Household Income

Source for Figure 4.20: Department of Statistics 4-28 Malaysia Based on the non-financial asset transaction value in the primary and secondary 29 markets, Bumiputera focussed more on residential related businesses as compared to commercial and industrial lots. Bumiputera transacted value for residentials in secondary market was RM16,846 million compared to RM32,263 million of non-Bumiputera as shown in Figure 4.21.

Non-Financial Asset Transaction in Primary and 4.21 Secondary Market, 2018

Primary Market Secondary Market Transaction Value Transaction Value

Transaction Value Transaction Value RM (mil) RM (mil)

8,000 40,000 6,558 6,205 32,263

6,000 30,000

4,000 20,000 16,846

2,000 10,000 7,509 848 163 100 1,509 8 1,058 95 0 0 Residential Commercial Industrial Residential Commercial Industrial

Bumiputera Non-Bumiputera Bumiputera Non-Bumiputera

Source for Figure 4.21: National 4-29 Property Information Centre (NAPIC) SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Bumiputera participation in selected professions remained low and was dominated by 30 non-Bumiputera except for dentists and surveyors as shown in Figure 4.22. This dominance was particularly evident in the accountancy profession where 92% of Malaysian registered accountants are non-Bumiputera.

Bumiputera in Certain Registered Professional 4.22 Occupations, 2010 and 2014

% from total

60 53 51 51 48 50 46 45 45 42 41 39 39 38 35 32 30

15 7 8

0 Accountant Architect Doctor Dentist Veterinarian Engineer Quantity Lawyer Surveyor

2010 2014

Source for Figure 4.22: Ministry 4-30 of Economic Affairs Bumiputera SMEs was not only fewer in number than non-Bumiputera but also 31 generated low average value-added at RM0.8 million as compared to RM1.0 million by non-Bumiputera as shown in Figure 4.23.

Value-Add of Small Medium Enterprises, 4.23 2015

RM1 MIL RM0.8 MIL 528,843 Unit 357,863 Unit

Bumiputera SME Non-Bumiputera SME

Source for Figure 4.23: Department of 4-31 Statistics Malaysia and analysis by Institut MASA SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

ECONOMIC SABOTAGE

Economic sabotage2 has derailed the efforts to assist marginalised groups and spur 32 economic growth. Cases of abuse of power and breach of trust still exist in the public and private sectors. The Corruption Perception Index (CPI) ranked Malaysia at 61st out of 180 countries in 2018 as compared to 39th out of 145 countries in 2004.

In addition, this position is supported by the findings from the Global Corruption Barometer 20173 survey, which provides perceptions of corruption at the national 33 level as follows:

33.1 60% of Malaysians viewed rising corruption levels; 33.2 57% of Malaysians perceived police involved in corruption; 33.3 48% of Malaysians claimed that local authorities and tax officials are involved in corruption; and

33.4 46% of Malaysians viewed corporate executives are involved in corruption.

Government Procurement. A case study conducted by the National Centre for 34 Governance, Integrity and Anti-Corruption (GIACC) and the Malaysia Anti-Corruption Commission (MACC), shows that there are leakages in the distribution of contract values received by Bumiputera contractors as follows:

34.1 10% to 15% distributed to middlemen or lobbyists; 34.2 5% to 7% to contract owners or concessionaires; 34.3 13% to 15% to political groups and bureaucrats; and 34.4 approximately 65% of the contract value is the actual cost of the project.

2 GIACC defines economic sabotage as the practice of deviating from the initial policy objective to increase the national socioeconomy and reducing economic disparity among ethnic groups, including but not limited to the act of corruption, monopoly, breach of trust, proxy arrangement, Ali Baba practice, unfair free trade agreement and data manipulation. 4-32

3 Global Corruption Barometer (GCB) by Transparency International (TI). The leakages have adversely affected the achievement of economic development 35 targets, especially Bumiputera. The project distribution has not fully benefitted the supply chain of Bumiputera contractors.

Based on 2015 estimates, of the RM1.1 trillion total Government revenue for 20 years, 36 a large portion was awarded to Bumiputera contractors. Nevertheless, the contribution of Bumiputera SMEs to GDP remains less than 9% as shown in Figure 4.24.

Contribution of Bumiputera SMEs in 2015 4.24 Compared to Government Procurement for a Period of 20 Years

RM . % % TRILLION MORE LESS

Government procurement for Estimated budget of Donations of SMEs development, supply and contract given to Bumiputera to GDP in 2015 service for 20 years Bumiputera groups in 20 (7 MP to 10 MP) years duration

Implementation of the Bumiputera agenda had been unachievable on account of 37 kleptocracy, nepotism, cronyism and corrupt practices as well as distortion in the supply chain. To date, Bumiputera achievement in the economy remains unsatisfactory.

Monopolies can cause uncontrolled pricing to take place and affect the entire supply 38 chain. Monopoly activities are still taking place at various stages of the supply chain from the supply of basic goods to the supply of building materials for mega projects.

Source for Figure 4.24: SME Corporation 4-33 Malaysia, 2015 & Centre for Entrepreneur Development and Research (CEDAR) SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

With reference to Figure 4.25, the report by the Malaysia Competition Commission 39 (MyCC) shows that the three major companies accounted for 31%, 22% and 21% of the country's cement market respectively. In 2019, through acquisition activities, one of the companies acquired 52% of the market and plans to increase by another 22%.

Distribution of Cement Production in the 4.25 Construction Industry, 2016 and 2019

% % % % % % % % % %

% % %

Distribution Distribution Production 2016 Production 2019

Company A Company D Company G Company A Company D Company B Company E Company B Company E Company C Company F Company C Company F

Profiteering. A Food Sector Market Study conducted by the MyCC found that in the 40 fish marketing chain, key wholesalers raised prices up to six times by benefiting between 60% and 75% of each chain. This profiteering is a major cause of the high price of fish in the market. It flies in the face of the hard work of fishermen who brave the oceans in search of a decent livelihood. It also underscores the incessant manipulation by middlemen.

Source for Figure 4.25: Malaysia Competition Commission (MyCC) and analysis by Institut 4-34 MASA Economic sabotage affects Bumiputera economic contribution to GDP. The 41 implementation of ineffective strategies coupled with inaccurate measures of outcomes have retarded the growth of Bumiputera economy. In 2014, Bumiputera economic contribution, accounted for 46% of Government-linked Companies (GLCs) gross operating surplus (GOS) to GDP. Of this, however, the actual contribution of Bumiputeras after deducting GLCs, GOS was only 28%. In respect of the national corporate GOS of RM727 billion, only RM81 billion can be attributed to Bumiputera companies as shown in Figure 4.26. These contributions illustrate the inherent gaps between Bumiputera and non-Bumiputera alliances, thus creating monopoly and economic gaps at alarming levels.

Estimated Gross Domestic Product (GDP) by 4.26 Bumiputera Ethnic Group, 2014

RM1,106 bn1

Bumiputera population: Population of 18.8 million Malaysia: 30.7 million Bumiputera GDP per capita = RM16,648 GDP per capita (46% of GDP per capita) GOS² = RM36,540 RM694 bn

1 RM313 bn 1 Includes revenue Taxes and Subsidies GOS² RM81 bn 2 CE³ Gross Operating Surplus RM131 bn1 (GOS) CE³ RM379 bn 3 Compensation of RM228 bn GOS² RM125 bn Employees (CE)

Bumiputera GLC Malaysia

Source for Figure 4.26: Matrix Account 4-35 Social Report 2014, Economic Census 2016 and analysis by Institut MASA SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

Economic sabotage affects Bumiputera corporate equity ownership. The 42 implementation of economic liberalisation policies since 2002 and the abolition of the FIC in 2009 have contributed to the increase in foreign equity ownership. The implementation of this policy has created a crowding-out effect that impedes Bumiputera ability to compete in equity ownership. According to the 2011 Corporate Equity Ownership Report by the Economic Planning Unit, Prime Minister's Department, the Bumiputera corporate equity ownership percentage was 23.4%, non-Bumiputera 34.8% and foreigners 37.2%, excluding nominee ownership. However, in 2015, Bumiputera and non-Bumiputera corporate equity ownership decreased by 16.2% and 30.7% respectively. Meanwhile, foreign equity ownership increased significantly to 45.3% during the same period as shown in Figure 4.27 and Figure 4.28. Therefore, the target of 30% of Bumiputera corporate equity ownership in the NEP is yet to be achieved.

Value and Percentage of Malaysian Corporate 4.27 Sector Equity Ownership, 2008, 2011 - 2015

Equity Ownership, RM million 980,505 1,000,000 902,123 904,710 % 844,364 % 794,782 % % % 750,000 581,841 % % % % % % 500,000 % % % % % % 250,000 %

% % % % % % 0 2008 2011 2012 2013 2014 2015

Bumiputera Non-Bumiputera Foreign Nominees

Source for Figure 4.27: Economic Planning Unit, Prime Minister's Department and Ministry of Economic Affairs 4-36 Percentage of Malaysian Corporate Sector 4.28 Equity Ownership, 2008, 2011 - 2015

Equity Ownership, %

70 63.3 60

50 46.8 37.9 45.3 40 37.2

30 34.3 25.4 36.7 34.9 30.7

20 23.4 19.3 21.9 16.2 10 4.5 2.4 8.5 3.5 7.8 0.00

1970 1990 2008 2011 2015

Foreign Non-Bumiputera Bumiputera Nominees

The red dotted line represents the time line after Malaysia's monetary liberalisation policy

Source for Figure 4.28: Economic 4-37 Planning Unit, Prime Minister's Department and Ministry of Economic Affairs SHARED PROSPERITY VISION 2030 4 CHAPTER 4: Situational Analysis

SUMMARY OF SITUATIONAL ANALYSIS

Over the last decade, the following has happened to Malaysia's socioeconomic 43 structure: 43.1 economic growth has yet to reach its full potential; 43.2 diversity of products and services has yet to reach an optimum level and the reliance on commodity-based exports is relatively high;

43.3 most industries are still in the low value added category with low technology adoption;

43.4 CE to GDP is still low; 43.5 disparity still exists between income groups, ethnic groups and regions; 43.6 the existence of unfair competition issues in the market as a result of monopoly and profiteering practices;

43.7 symptoms of corruption and abuse of power affect fair and equitable economic growth and distribution; and

43.8 Bumiputera economy has not grown in line with the country's development and progress.

Based on the wants and needs of the nation's economy, Shared Prosperity Vision has 44 been formulated to address the above issues.

4-38 5 CHAPTER 5 Guiding Principles

Introduction Continuous Prosperity Equitable Outcome Equitable Growth Distributed Economy Inclusivity Learning Society Future Economy Needs-Based Approach Economy Institutional Political-Economy Integrated Social Model Economic Centre of Asia Democracy and Stability Integrity and Good Governance Unity in Diversity Sovereignty and Sustainability CHAPTER 5 Introduction

Shared Prosperity Vision takes into account a wide spectrum of thoughts, views and philosophies embedded in the socio-cultural context of the unique nature of Malaysia’s society. Therefore, the 15 Guiding Principles have been set as a guide for the preparation of the strategic thrusts, enablers and target achievements.

1 2 3 DEVELOPMENT ADDRESSING UNITED, FOR ALL WEALTH & INCOME PROSPEROUS & DISPARITIES DIGNIFIED NATION

GUIDING PRINCIPLES

Continuous Learning Economic Prosperity Society Centre of Asia

Equitable Future Democracy Outcome Economy and Stability

Equitable Needs-Based Integrity and Growth Approach Good Economy Governance

Distributed Institutional Unity in Economy Political-Economy Diversity

Inclusivity Integrated Sovereignty Social Model and Sustainability

5-01 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 1 CONTINUOUS PROSPERITY

Continuous prosperity is defined as a sustainable and resilient economic growth, capable of absorbing volatility from commodity supply and demand shocks as well as global economic uncertainties.

In order to achieve Shared Prosperity Vision, the economy will have to expand with continuous positive growth. Although Malaysia's GDP grown positively, the economic structure has not shifted to be more productive, among others, in areas of high technology, high value add and knowledge-based industries. This shift is necessary for the economy to grow in tandem with future trends.

The main aim of this principle is to build economic resilience to be able to absorb any global market volatility that influences price, demand and supply changes. In addition, geopolitical instability that could create external shocks must be addressed without affecting economic growth.

The principles of continuous prosperity emphasise the following outcomes:

multiplying the size of the economy and increasing added value in the supply 1.1 chain;

implementing sustainable development models including production 1.2 capacity, intellectual property ownership and multiplying contribution of SMEs to the GDP;

participating and developing new industries especially by SMEs and 1.3 start-ups;

multiplying value added in the supply chain of local companies especially 1.4 among SMEs;

creating and strengthening Malaysian brands in global markets especially in 1.5 the ASEAN market; and

creating high-paying jobs, increasing labour participation, increasing skilled 1.6 workers and effective workforce.

5-02 GUIDING PRINCIPLE EQUITABLE OUTCOME

Shared Prosperity Vision will focus on the Equitable Outcome approach rather than the Equitability of Opportunities. This commitment will enable the people to experience the benefits of wealth distribution and national development. According to Dr. Ha Joon Chang1, South Korean development economist at Cambridge University:

“Equality of opportunity is the starting point for a fair society. But it’s not enough. Of course, individuals should be rewarded for better performance, but the question is whether they are actually competing under the same conditions as their competitors. …”

“…Unless there is some equality of outcome, equal opportunities are not truly meaningful.”

The implementation of the NEP has provided opportunities for all races, including Bumiputera. However, Bumiputera achievement did not produce the desired results. The affirmative action for Bumiputera has been exploited at the expense of Bumiputera in general. At the same time, there are groups such as the poor and the marginalised and those in the rural areas who are not benefiting from the policy. This affirmative action is also seen as unfair because it disregards the merits and abilities of other groups while favouring certain groups who are out to take advantage of the policy.

Ha-Joon Chang (2010), 23 Things They 1 5-03 Don’t Tell You About Capitalism SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

Policy implementation leakages, abuse of power and corruption are major challenges in achieving equitable outcome. Therefore, a more comprehensive approach in attaining equitable outcome is essential in order to reach Shared Prosperity Vision targets for all income groups, ethnicities, regions and supply chains.

To achieve the equitable outcome of Shared Prosperity Vision, the targets include:

2.1 equal median salary ratios based on merit; 2.2 bridging household income disparities; 2.3 income equitability between capital owners and employees; 2.4 professional and corporate management ratios based on percentage of population by ethnic groups;

2.5 increasing Bumiputera SMEs contribution to GDP; 2.6 equitable economic distribution; and 2.7 positive social mobility.

5-04 GUIDING PRINCIPLE 3 EQUITABLE GROWTH

Equitable growth means the shrinking of the disparities between income groups, ethnicities, regions and supply chains as well as the elimination of economic monopoly. This principle places emphasis on a fair and equitable distribution of the economic pie according to the country’s demography.

Inequitable growth has led to widening wealth and income disparities in Malaysia. In 2017, median income and wage of workforce was RM2,160 per month. Meanwhile, the difference between median household income in FT of Kuala Lumpur and Selangor state almost doubled compared to the states of Kelantan, Kedah, Pahang, Sabah and Sarawak.

Equitable growth does not mean that all parties will achieve the same results as has been shown empirically. Nevertheless, true income equality can only be achieved in accordance with compliance to anti-discrimination principles.

The principles of equitable growth emphasise the following outcomes:

3.1 introduction of legislation in the private sector especially in the context of employment and salaries;

3.2 narrowing the household income ratio gap; 3.3 fair participation in the supply chain; 3.4 reducing monopoly power; and 3.5 improvement of anti-profiteering measures.

5-05 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 4 DISTRIBUTED ECONOMY

Distributed economy refers to economic distribution that delivers beyond geographical boundaries to ensure distributive justice. Barriers to economic distribution in terms of localities, accessibilities and urban-rural development gaps must be addressed through distributed and fair economic management. This includes strengthening logistics and trade facilitation, improving internet accessibility and public infrastructure covering road networks in rural and remote areas.

High value economic activities are concentrated in the FT of Kuala Lumpur, Selangor, Johor and Pulau Pinang. In 2018, FT of Kuala Lumpur and Selangor state alone contributed almost 40% to the GDP compared to other states such as Perlis (0.4%), Kelantan (1.8%), Terengganu (2.6%) and Kedah (3.3%). Concentrated economic activities in both states (FT of Kuala Lumpur and Selangor state) led to the developmental imbalance between states and territories.

Distributed economic principles emphasise the following outcomes:

4.1 reducing urban-rural GINI coefficient; 4.2 narrowing the inter-state GDP gap; 4.3 reducing the value of the intermediate household income gap between states; 4.4 identifying and developing the state and regional economic catalysts; 4.5 increasing the number and added-value of SMEs for each state; and 4.6 reducing accessibility constraints in logistics and market.

5-06 GUIDING PRINCIPLE 5 INCLUSIVITY

Inclusivity means an economic approach focussed on efforts to ensure that marginalised groups are involved in economic and national development. These approaches include establishing an economic growth centre near the geographical area of the group, improving accessibility to assistance and comprehensive social security networks as well as implementing poverty eradication programmes.

According to the World Economic Forum Report in 2018, Malaysia has shown less favourable level of inclusion compared to some European and Eurasian countries in terms of development and inclusive growth according to GINI coefficient as shown in Table 5.0.

National Development & Growth by Level of 5.0 Inclusion 2018: Five-Year Trends

NETT COUNTRY POVERTY, % WEALTH GINI MEDIAN INCOME , INCOME GINI1 ( - ) ( - ) AS$

Lithuania 0.4 -0.7 -14.9 2.2

Hungary 0.4 0.7 -18.7 0.4

Azerbaijan 2.1 2.2 -14.1 0.6

Latvia -0.3 -2.7 -12.4 10.8

Poland 0.6 -0.1 -2.0 1.4

Malaysia -0.9 -0.3 0.5 0.9

Notes : 1. Refers to 2016 or latest available year. 2. Refers to between 2008 and 2012 or latest available year.

Source for Table 5.0: Inclusive 5-07 Growth and Development Report 2018, World Economic Forum SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

Inclusivity has become a key principle in the country's development plan where no group will be marginalised. These principles represent various groups and are not limited to: 1 B40 group, Poor and Economically Vulnerable; 11 Community in Economic Transition; 111 Indigenous Community; 1v Bumiputera in Sabah and Sarawak; v Persons with Disabilities; v1 Youth; v11 Women; v111 Children; and 1x Senior citizens.

The principles of inclusivity emphasise the following outcomes:

5.1 multiplying median household income; 5.2 increasing the number of natives in high-skill and professional occupations; and 5.3 improving social mobility issues in economic transition.

5-08 GUIDING PRINCIPLE 6 LEARNING SOCIETY

Learning society is a knowledgeable society that places primacy on lifelong learning. The society is also able to identify personal weaknesses as well as to change and improve the wellbeing of individuals, families and communities. This principle encompasses the needs to increase individual achievement through policies and institutional improvements based on local cultures and values.

In order to continuously facilitate knowledge advancement and learning, a more integrated Government intervention is necessary to nourish lifelong learning. Learning society is imperative in advancing the economy and can only be attained in a stable and democratic nation as well as in an open society.

The principles of learning society emphasise the following outcomes:

6.1 fostering culture of knowledge in society; 6.2 engaging community to actively participate in policy formulation and development planning;

6.3 developing generation of skilled workers based on future industry needs; 6.4 intensifying technology transfer and reverse engineering in the manufacturing sector; and

6.5 increasing local intellectual property development through policy enhancement.

5-09 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 7 FUTURE ECONOMY

Future economy refers to the need to change in attitudes, policies, legislation, technologies, infrastructure, assets and business trends in order to stay relevant and meet future economic demands. Under this principle, exploration in new areas such as digital economy, automation, platform preparation, fintech, AI and blockchain will be given priority. Malaysia should have clear policies to raise awareness in allowing the rakyat to adapt to and dominate the future economy, instead of being mere consumers.

Business and marketing trends based on digital economy has created various types of jobs that use social media applications such as Facebook, Instagram and Whatsapp. The introduction of disruptive platforms such as e-hailing, e-booking and e-mall has changed marketing methods and service delivery. Furthermore, the production process has experienced radical changes including the use of drone technology, smart farming and augmented reality (AR). Besides that, financial activities have shifted to digital platform such as e-payment, e-wallet and robo-advisor for investment-related activities.

Failure to adapt to future economy, among others, will lead to domination of the country’s big data by the global community through transborder digital platform. This will limit the control over corporate crime, fraud, money transaction outflows and foreign exchange stability.

5-10 The principles of future economy emphasise the following outcomes:

7.1 increasing the number of innovations; 7.2 creating more jobs, particularly for the B40 group; and 7.3 strengthening Malaysia's position as the Fintech Hub for Islamic Finance.

Photographer: Frank V 5-11 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 8 NEEDS-BASED APPROACH ECONOMY

The needs-based approach economy highlights the importance of a holistic demographic definition and classification. This will make policy formulation more effective in targetting groups that require Government assistance.

Hardcore poverty is almost eradicated in Malaysia. However, there is a need to revisit the definition of hardcore poverty by considering the use of Multidimensional Poverty Index (MPI) and taking into account relative poverty to assess poverty levels in Malaysia. In addition, the data of hardcore poor and the marginalised and vulnerable groups need to be reassessed.

A report by Bank Negara Malaysia (BNM) in 2016 showed that 80% of Malaysian’s do not have retirement savings. The findings call for a review of existing policies and programme implementation. This is to improve economy-related policies based on needs specifically in addressing the problems of the poor and the marginalised and vulnerable groups.

The principles of a needs-based approach economy emphasise the following outcomes:

8.1 strengthening education and entrepreneurship programmes; 8.2 improving welfare programmes; 8.3 enhancing health service delivery system, developing affordable housing and increasing accessibility to transportation networks.

5-12 GUIDING PRINCIPLE 9 INSTITUTIONAL POLITICAL-ECONOMY

Institutional political-economy defines the balance that exists between the role of market and the Government in economic development. This approach harmonises the needs and desires of various parties in the economic ecosystem covering all the stakeholders including investors, manufacturers, distributors, wholesalers, traders, consumers and the Government.

The role of Government in institutional political-economy approach among others, is through the ownership of shares in SOEs, policy formulation as well as determination of priorities for business and trade sectors. The absence of policies that balance the role of the Government and market demand, as well as SOEs in the economy will cause imbalance, monopoly and widening economic disparities.

The principles of the institutional political-economy emphasise the following outcomes:

9.1 formulating contemporary and relevant policies as well as creating and expanding emerging industries;

9.2 diversifying investments and business models in strategic industries by SOEs; and

9.3 transferring and adapting technologies as well as empowering local industries.

5-13 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 10 INTEGRATED SOCIAL MODEL

Integrated social model aims to increase the level of the rakyat’s trust towards each other regardless of ethnicities and religions. This model emphasises intensifying participation of all segments of society in social development leading to lasting unity of the rakyat and harmony of the country. The role of civil society, religious organisations and community associations are important in strengthening the nation's social capital. The integrated social model will be based on the Federal Constitution and the principles of the Rukun Negara.

The Government needs to provide a substantial allocation to improve the standard of living of the most vulnerable groups. Initiatives implemented only provide short-term solutions and do not improve the standard of living of the target groups. The provision of substantial and long-term allocation can adversely affect the country's financial position. While the related programmes cannot be implemented in a sustainable manner, various initiatives by the Government agencies are also implemented in-silos despite similar target groups.

Strengthening the social support system is imperative due to a clear connection between the country's prosperity and the rakyat’s quality of life. In addition, the empowerment of vulnerable groups in education and training can maximise their participation in community activities. This is to enhance their social and economic capabilities.

The principles of the integrated social model emphasise the following outcomes:

10.1 increasing participation of non-governmental organisations (NGOs) in complementing Government’s delivery;

10.2 enhancing social interactions between religious groups, ethnicities, geographic and socioeconomic levels;

10.3 increasing productivity that is balanced with quality of life; and 10.4 preserving the welfare of the vulnerable groups.

5-14 GUIDING PRINCIPLE 11 ECONOMIC CENTRE OF ASIA

The economic centre of Asia entails continuous efforts in enabling Malaysia develop its full economic potential in a holistic and sustainable manner while maintaining political stability to ultimately emerge as the ASEAN Economic Hub and an Asian Tiger.

Qualitative projections3 indicate that by 2050, economic expansion will shift from Europe to Asia, particularly in the People’s Republic of China and India. Nevertheless, Malaysia has yet to capitalise on the opportunities resulting from this transition, which will enable the country to become the ASEAN Economic Hub and to achieve its goal of becoming an Asian Tiger.

In addition, ASEAN is seen as a potential global production and trading hub with the fastest growing global consumer market. ASEAN's aspiration in creating the ASEAN Economic Community is to achieve the following goals:

1 ASEAN single market and production platform; 11 highly competitive region; 111 equitable economic development; and 1v fully integrated with global economy.

The principles of the economic centre of Asia emphasise the following outcomes:

11.1 strengthening comprehensive development instruments towards the ASEAN and Asian markets;

11.2 penetration of Malaysian brands and intellectual properties into ASEAN, Asian and global markets;

11.3 promoting foreign investments and the development of ASEAN regional hubs in Malaysia; and

11.4 increasing exports and production of high value-added products in the downstream industries to Asian and global markets.

The Global Economy’s Shifting Centre 3 5-15 of Gravity, Danny Quah, 2011 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 12 DEMOCRACY AND STABILITY

Democracy and stability implies fostering democratic practices in the administration of the country, while maintaining national sovereignty as well as enhancing border control and monitoring from any threat. The country’s administration is based on the principle of the rule of law that guarantees the fundamental freedoms of the rakyat as stated in the Federal Constitution. The security of the rakyat also continues to be protected through enforcement of the law in a strict and fair manner.

The strength of the country's borders and sovereignty is crucial in ensuring Malaysia remains safe, prosperous and stable. This will only be achieved whenever a new policy introduced is respected and accepted by all. In maintaining peace, prosperity and stability of the country, the policies enacted need to emphasise the following aspects:

1 national sovereignty; 11 national security; 111 maturity of the rakyat; 1v ownership of shared responsibility; and v balance of rights and responsibilities.

Democracy and stability do not only preserve the mandate of the Government institutions but also the rights of the rakyat as voters. The separation of power within the Government comprising the executive, the legislative and the judiciary should be instrumental in ensuring that the policies enacted are for the peace, prosperity and stability of the nation and the wellbeing of the rakyat.

5-16 The principles of democracy and stability emphasise the following outcomes:

12.1 preserving national sovereignty includes addressing subversive elements that may be detrimental to the national identity;

12.2 strengthening national security in all aspects; 12.3 maintaining a clear separation of power between executive, legislative and judiciary; and

12.4 fostering a sense of shared responsibility in preserving the country's stability.

Photographer: Deva Darshan 5-17 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 13 INTEGRITY AND GOOD GOVERNANCE

Integrity and good governance will enhance confidence of the rakyat towards public and private institutions. Governance can be improved in tandem with the adoption of high integrity values. The inculcation of noble values such as trust, honesty and a sense of responsibility in carrying out obligations will prevent leakages and corrupt practices thereby eventually raising the rakyat’s confidence towards Government institutions.

Some of the key areas that require emphasis4 in instilling integrity and good governance are as follows: 1 political governance; 11 public sector administration; 111 public procurement; 1v legal and judicial; v law enforcement; and v1 corporate governance.

Empowerment of legislation is necessary to ensure that policy implementation is governed properly in order to prevent leakages.

The principles of integrity and good governance emphasise the following outcomes: 13.1 elevating the credibility of the legal system in tandem with social change; 13.2 strengthening accountability and integrity; and

13.3 improving the rakyat’s perception towards public administration.

4 National Anti-Corruption Plan 2019-2023, Prime Minister’s Department 5-18 GUIDING PRINCIPLE 14 UNITY IN DIVERSITY

Unity in diversity suggests a continuous effort to make the rakyat more appreciative of the diverse ethnicities, religions and cultural backgrounds in Malaysia. Hence, embracing the concept of national unity that is based on recognition, acceptance and appreciation of diversity.

The recent global trend depicts the increased spread of extremism culminating in a number of political movements that have divided the unity of Malaysians. With extreme beliefs and fanatical movements spreading rapidly on a global scale, such movements will pose a serious danger to our security if left unchecked.

The absence of social interaction, movements and assimilations may lead to problems of unity in society. This principle can be achieved by taking into account the following aspects: 1 social interaction platforms; 11 national identity; 111 harmonious ideological plurality; and 1v priorities of nation-building. Better opportunities and conducive social interactive spaces serve as catalysts in uniting the rakyat beyond ethnicities, religions, localities and socioeconomic differences. The basis for this interaction is mutual respect and high tolerance among the rakyat. Refined policies need to be formulated in addressing ethnic and ideological polarisation as well as shaping national identity. Among the important measures to be undertaken is creating social interaction platforms accessible to all.

The principles of unity in diversity emphasise the following outcomes:

14.1 promoting social interaction among various layers of society; and 14.2 forming a society that recognises existing similarities and the need for solidarity.

5-19 SHARED PROSPERITY VISION 2030 5 CHAPTER 5: Guiding Principles

GUIDING PRINCIPLE 15 SOVEREIGNTY AND SUSTAINABILITY

Sovereignty refers to efforts in building the country's capacity in order to accommodate the needs of the rakyat and ensure food security through resource ownership by local entities. On the other hand, sustainability is an effort to ensure that economic development is aligned with endeavours to preserve the environment and the wellbeing of the society.

Malaysia needs to increase its capacity in producing foodstuff and enhancing sustainable agriculture and plantation activities. The implementation of sustainable socioeconomic development should take into account environmental preservation and natural resources to meet the needs of present and future generations.

The country's rapid development process puts pressure on the environment and natural resources arising from land clearing for infrastructure, agriculture, plantation, industrial and housing development. Development that neglects environmental sustainability will result in fragmentation of flora and fauna habitat and the degeneration of the forest ecosystem. Rising population has resulted in higher demand on resources and increased waste production. Therefore, proper management of natural resources and the environment is required. Failure to do so will increase competition for resources, erode competitiveness, and create overdependency on external sources.

The principles of sovereignty and sustainability emphasise the following outcomes:

15.1 increasing production of local food sources; 15.2 more effective legislation in the agricultural sector; 15.3 promoting the use of technology in agricultural activities; 15.4 compliance to the Environmental Impact Assesment (EIA) and Social Impact Assesment (SIA); and

15.5 strengthening environmental conservation and natural resources in development planning.

5-20 6 CHAPTER 6 Strategic Thrusts

Introduction

STRATEGIC THRUST 1 Restructuring Business and Industry Ecosystem STRATEGIC THRUST 2 Key Economic Growth Activities (KEGA) STRATEGIC THRUST 3 Transforming Human Capital STRATEGIC THRUST 4 Strengthening the Labour Market and Increasing Compensation of Employees STRATEGIC THRUST 5 Social Wellbeing STRATEGIC THRUST 6 Regional Inclusion STRATEGIC THRUST 7 Social Capital CHAPTER 6 Strategic Thrusts

INTRODUCTION

The seven strategic thrusts are developed as a key to accomplish the Shared Prosperity Vision initiatives and are designed to achieve three main objectives, namely, development for all, addressing wealth and income disparities, and making Malaysia a united, prosperous and dignified nation. All thrusts are developed based on guiding principles that emphasise policy formulation and implementation of Government programmes. They are aimed at addressing issues that affect the rakyat, the economy and the administrative system.

1 RESTRUCTURING BUSINESS AND INDUSTRY ECOSYSTEM Example of Targets: • SME and micro businesses to contribute 50% of GDP STRATEGIC • To create 30% high technology companies from total SMEs in manufacturing THRUST and services subsectors • At least 20% of high technology Bumiputera SMEs in each2 subsector 1 • Bumiputera SMEs to contribute 20% to GDP

KEY ECONOMIC GROWTH ACTIVITIES (KEGA) Example of Targets: 6 7 • 2/5 of total investment is in machinery and equipment STRATEGIC • Increased contribution of high technology subsector to the following sectors: THRUST ○ Manufacturing: 50% ○ Services: 30% • Malaysia to build resilient key new sectors as follows: 3 2 ○ Islamic Finance Hub 2.0 ○ Malaysia Commodities 2.0 ○ Renewable Energy ○ Centres of Excellence ○ Green Economy ○ ASEAN Hub�

4 6-01 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

1 TRANSFORMING HUMAN CAPITAL Example of Targets: • 35% of high-skilled workers in labour force STRATEGIC • Majority of workforce in high-skill jobs and future economic sectors will be THRUST Bumiputera • 40% of HRDF training in skills related to 4IR 2 • At least 60% of SPM leavers to pursue TVET field 3 • Programme offerings at universities and training institutes will be tailored to the needs and requirements of industries • Increase local and Bumiputera employees in management and professionals in MNCs

LABOUR MARKET & COMPENSATION1 OF EMPLOYEES Example of Targets: STRATEGIC • Malaysian labour market is free from discrimination over age, gender, THRUST ethnicity and religion • Average salary increment to ¾ of annual productivity value increases • Address acts of economic sabotage and discrimination2 4 • Increase labour productivity growth in line with quality of technology in industry by sector • Reduce the total number of foreign workers by implementing sector-based thresholds • Increase contribution of Bumiputera CE to GDP

SOCIAL WELLBEING Example of Targets: • Equality in merit-based median salary ratio STRATEGIC • Measure poverty level by using relative poverty index THRUST • Build day care centres in every locality • Affordable housing cost is based on 30% of monthly2 median household 5 income in Malaysia

6-02 1 REGIONAL INCLUSION Example of Targets: • Integrated urban-rural public transportation system STRATEGIC • 10 listed companies in each developing state, half of which are Bumiputera THRUST • Reduce income disparity between regions by half • Reassess quantity and quality of Malay reserve land • Introduce new regional economic hotspots particularly outside Klang Valley 6 areas • Ensure the nation’s Critical Infrastructure Development Plan is realised (e.g. hospitals, schools, bridges)

SOCIAL CAPITAL Example of Targets: Achieve positive increase for the following indices: STRATEGIC • Unity Index THRUST • Integrity and Anti-Corruption Indicator • Religious Harmony Index • Environmental and Climate Change Index 7 • Anti-Drug Index 1 • Crime Prevention Index • Neighbourhood Harmony Index • Rakyat Health Index • Family Wellbeing Index

BUMIPUTERA OUTCOMES INCLUDED IN ALL STRATEGIC THRUSTS

6-03 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

STRATEGIC THRUST 1 RESTRUCTURING BUSINESS AND INDUSTRY ECOSYSTEM

Malaysia's economic growth fundamentally remains strong. Economic indicators such as GDP, GNI and poverty incidence illustrate positive trends. Nevertheless, there is room for improvement particularly in business and industry ecosystem which needs to be restructured in order to move Malaysia forward to become an advanced country.

1.1 BACKGROUND

The restructuring of business and industry ecosystem is defined as a process of rebalancing the business and industry ecosystem. The restructuring involves initiatives to strengthen and enhance the competitiveness and cooperation of small and medium enterprises (SMEs) with large companies. In addition, this process involves initiatives in increasing SME capabilities in line with current market requirements.

This restructuring is imperative due to the huge gaps between SMEs and local and multinational corporations (MNCs) which appear at the level of technology adoption as well as the ability to explore new industries and increase productivity.

This strategic thrust will support the business and industry ecosystem to be more productive by increasing technology adoption and expanding SMEs investment in emerging industries. A more productive ecosystem enables SMEs to produce high value-added products and fulfilling international standards, while creating high-paying jobs and increasing income.

6-04 1.2 KEY ISSUES AND ANALYSIS OF CURRENT SITUATION

SMEs' technology adoption remains low and utilisation of computers is limited to administrative matters. A study by SME Corp1 reveals 79.7% of SME entrepreneurs realise the importance of using digital technology for key business operations albeit at low utilisation levels. The utilisation of digital technologies such as Customer Relation Management (CRM) and Enterprise Resource Planning (ERP) is still low, at 12.5% and 10.5% respectively. The findings of the study show that SMEs using digital technology to conduct business operations increased their productivity by as much as 60%.

Large local companies and MNCs are less likely to involve SMEs in the production chain as most of the input required can be sourced through imports or other large companies. Cooperation between SMEs and large companies in an industry is still minimal despite the high demand from MNCs. Therefore, collaboration of large local companies and MNCs with SMEs will be intensified to enhance the contribution of SMEs to the economy.

The capacity of Bumiputera companies remains small. The contribution of Bumiputera SMEs to the national GDP is less than 9%, while the value added by Bumiputera SMEs is one-third of non-Bumiputera SME contributions. In addition, the number of Bumiputera SMEs is still low, which is 39% compared to 57% of non-Bumiputera SMEs2. These shortcomings show that efforts to raise the capacity of Bumiputera SMEs still need to be improved. Therefore, strengthening the capacity of Bumiputera companies in the production of goods and services should be undertaken to balance and harmonise the business and industrial ecosystem in Malaysia.

1.3 STRATEGY RECOMMENDATIONS

The restructuring of the business and industry ecosystem entails 14 strategic proposals to address identified issues. The recommendations are as follows:

Malaysia Digital SME Study 2018, SME Corp. Malaysia & 1 6-05 Huawei Technologies (M) Sdn. Bhd. Economic Census Report 2016, Department of Statistics 2 Malaysia SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

identifying and mapping out anchor companies in high value-added 1 business and industry supply chains to enable SMEs to venture into related downstream industries;

intensifying the cooperation between large companies and SMEs through 11 industrial cluster-based business associations by encouraging large companies to use inputs, products or services from SMEs;

strengthening the supply chain and developing SME vendors to drive 111 growth;

reviewing, rationalising and improving entrepreneurship development 1v programmes including assisting Bumiputera companies to be more competitive;

increasing the involvement of SMEs in the digital economy in producing v high value-added innovation and intellectual property; v1 expanding high value-added manufacturing activities and services; v11 developing programmes that cover all levels of technology and automation in line with the Fourth Industrial Revolution (4IR) to generate new innovations;

developing online information-sharing platforms for companies, products v111 and services to ensure existing and new enterprises remain relevant in the market; 1x enhancing innovation for the creation of local-based content products, to create new opportunities and brands through collaboration and R&D with institutions of higher education and research centres;

strengthening governance of public funds related to research, x development, commercialisation and innovation (R&D&C&I) to ensure better returns on investment;

enhancing the implementation of knowledge sharing and technology x1 transfer programmes;

6-06 focussing on better quality investments especially in information and x11 communication technology and other machinery and equipment; x111 reviewing incentives to be more objectives and productivity-based; and x1v expanding and improving the development of local supply chain programmes.

6-07 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

STRATEGIC THRUST 2 KEY ECONOMIC GROWTH ACTIVITIES (KEGA)

Sectors with potential to grow faster need to be identified to drive future economic development. With these sectors in place, the Government's efforts to boost economic growth will be implemented through a centralised initiative, thus developing an ecosystem throughout the supply chain. The proposed Key Economic Growth Activities (KEGA) will not disregard the development of existing economic activities such as oil and gas, manufacturing, electrical and electronic goods and other services. A total of 15 KEGA proposals have been identified for development.

2.1 BACKGROUND

KEGA is defined as a future economic activity that demonstrates the potential for rapid growth in line with the country's aspiration to achieve high value economic development.

The country needs to focus on emerging industries. At present, business operations are still using conventional economic models that rely heavily on commodity-based trading and low-value products. Besides that, industrial diversification activities are more likely to venture into non-core business.

To overcome this, the focus on the development of new economic activities is in line with the goal of expanding the business spectrum in Malaysia. With a number of selected sectors showing potential for development in the national and regional economic environment, existing policies need to be improved in addition to the formulation of new policies to align with the goals of industry and targeted business growth.

6-08 The Strategic Thrusts will ensure economic activities shift to high value-added and knowledge-based sectors as well as create a balanced industrial and business ecosystem, and high skill human capital. Some targeted activity recommendations are:

2.1.1 to focus on industry development through integrated policy implementation;

2.1.2 to promote high value and sustainable investment;

2.1.3 to develop a holistic activity ecosystem; and 2.1.4 to improve outcomes by quality monitoring.

2.2 KEY ISSUES AND ANALYSIS OF CURRENT CONDITIONS

There are still development programmes that are incompatible, ineffective and implemented in-silos. In formulating a holistic development programme, the main challenge is to analyse the capabilities of the industry based on the available and accurate data in each industry.

In addition to the challenge of anticipating future needs and competition, the lack of data has impaired the understanding of relevant and future industries. For example, taxi services are now facing the challenge of e-hailing services that provide more efficient service at a lower cost. This has created tension among taxi operators and stakeholders as their income has been affected.

6-09 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

2.3 STRATEGY RECOMMENDATIONS

The selected KEGA will be a new priority with emphasis on generating significant growth and contributing to GNI in the future. KEGA activities will improve over time, depending on the performance of each activity. The evaluation process will be implemented to ensure that each selected activity is competitive and sustainable.

To date, a total of 15 KEGA activities have been selected as follows:

KEGA CONSIDERATION BASIS

KEGA 1: Malaysia was a leader in the first wave of Islamic Islamic Finance banking in the 1990s, and the industry has grown Hub 2.0 - (Second rapidly, with the presence of stiff competition. wave / Fintech) Once again, Malaysia has to lead the second wave of Islamic finance, by adapting to the digital fintech world that continues to expand.

KEGA 2: Malaysia must take the lead in driving the digital Digital Economy economy encompassing ownership, production, (Cashless, innovation, financial support, intellectual property Disruptors, and deeper research. platform and fintech)

KEGA 3: Fourth Industrial Revolution (4IR) includes big Fourth Industrial data, artificial intelligence, augmented reality (AR) Revolution - and machine learning. Malaysia needs to be fully (Manufacturing, prepared to seize all opportunities and face the Supply and challenges of 4IR. The Government will create a Services) conducive ecosystem to bring about manufacturers, creators, suppliers and service providers particularly in the ASEAN market.

6-10 KEGA 4: A few companies and talents in the local animation Content scene have successfully penetrated premier Industries - international markets. The potential can be (Animation, harnessed further with facilitation, grants for Programming, capital and to create an ecosystem that is Entertainment, appropriate for the activities of content industries Culture and such as programming, entertainment, culture and Digitalisation) digital media.

KEGA 5: Malaysia has the potential to expand its goods and ASEAN Hub services markets to 600 million consumers cross the ASEAN region. To facilitate this, Malaysia should start by providing opportunities to local and foreign companies to operate as ASEAN Hubs. 12 activities with potential are to be developed as ASEAN Hubs, namely, (i) logistics (ii) fintech and Islamic fintech (iii) law and arbitration (iv) halal industry (v) high skill human capital (vi) digital platforms (vii) maritime trade (viii) ASEAN lifestyle (ix) animation and digital content industry (x) Asian tourism (xi) health tourism and (xii) gas trading market.

KEGA 6: The halal industry has been a focus of Halal and Food development over the past two decades in Hubs Malaysia. The JAKIM halal standard is globally accepted and has a high commercial value. Malaysia is also a producer of processed food that are well-received in terms of hygiene and sanitary standards. Combined, these characteristics can boost Malaysia’s halal industry. JAKIM’s halal standard can be enhanced in order to align with international standards, as a way to expand the acceptance of the JAKIM certification.

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KEGA 7: Malaysia is still dependent on commodity trade Malaysia that is low value-added. Therefore, research, Commodities 2.0 innovation, financing and facilitation must be provided in order to produce downstream products from traditional commodities and to generate higher returns and growth of new industries.

KEGA 8: Providing a transportation system that is Transportation, integrated, sustainable and affordable is a priority Logistics and that can reduce public burden and encourage Sustainable continued development. TLSM integrated with the Mobility (TLSM) National Physical Plan and Maritime Policy has the potential of becoming a holistic and sustainable strategy. The use of green technology, low carbon and strategic traffic management will create the connectivity of logistic centres and the establishment of new economic centres in the aerospace, automotive and shipbuilding industries.

KEGA 9: The coastal and maritime economy is yet to be fully Coastal and developed except for high-end tourism and Maritime fisheries. Malaysia’s vast and strategic coastal and Economies maritime areas can be developed as new (International economic centres as well as a means to Waters) rehabilitate the natural resources of the area.

6-12 KEGA 10: Centres of Excellence (COEs) do not provide large Centres of or immediate returns. However, the existence of Excellence COEs can leave large, indirect impact on the growth of research, development and training in new skills, technology adoption, technology exchange and the growth of a professional and skilled workforce. The development of COEs at the ASEAN level, operating to global standards, will boost investor and market confidence in Malaysia as an important investment destination in ASEAN. In addition, areas such as development of animation, technology and anti-corruption service can be pioneered in new COEs. The creation of COEs could be extended to future technologies such as nanotechnology, IR4.0 and the digital economy. The role of existing COEs such as the Penang Skills Development Centre (PSDC) and the Malaysian Industry-Government Group for High Technology (MIGHT) could also be expanded.

KEGA 11: By 2025, the target contribution of Renewable Renewable Energy (RE) to electricity generation is 20%. Energy (RE) Malaysia has the potential to progress far in this activity, by facilitating the use of new technology, providing pilot localities and offering funding for RE generation. Among the examples are mini hydro, solar, algae, biomass, biogas and municipal solid waste.

KEGA 12: Green Economy is a global trend, practised by Green Economy more informed societies and emphasising low-carbon activities as well as effective and

6-13 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

inclusive sources. Green Economy encompasses activities such as green buildings, sustainable transportation and mobility, food sovereignty and security, energy and maritime, plastic substitute products, smart and sustainable cities, sustainable coastal development, environmental preservation and rehabilitation, climate adapted technology and organic farming. Green Economy also refers to the creation of a circular economy that is capable of operating without emitting waste.

KEGA 13: Smart Farming refers to the wide use and Smart and High- integration of high technology that is Value Farming environmentally friendly in farming activities, in order to increase the quantity and quality of domestic harvests, while at the same time reducing the agriculture sector’s dependence on labour. For example, drones can be used to spray insecticide and Internet of Things (IoT) sensors can analyse farmland and monitor farming produce. The effectiveness of smart farming can be strengthened with automation, precision agriculture applications and vertical farming.

KEGA 14: The services sector is the largest sector in Advanced & Malaysia. Therefore, modernisation and Modern Services diversification of the sector must be in line with technological advancement and current market demand. Emphasis on subsectors such as environmental services, professional services and technology services will catalyse an increase in

6-14 value across the sector. In addition, providing services that are suitable for future industries will make Malaysia a top choice for investors.

KEGA 15: Tourism activities provide large returns to the Tourism: country. Nevertheless, there is further room for Malaysia Truly improvement in these activities including Asia integrating multiple tourism platforms such as agrotourism and ecotourism, health tourism, heritage tourism and experience-based tourism. In addition, tourism activities encourage efforts to improve local content and business, provide benefit to environmental rehabilitation and enhance health services as well as celebrate Malaysia’s cultural diversity.

In addition to implementing 15 KEGAs as future economic activities, the existing industries will continue to be strengthened through three key strategies. First is to diversify across sectors and geographies to ensure that the commodity, agriculture and construction sectors continue to expand across regions and states. Currently, all three sectors are facing flat and unstable growth and are in the low value-added category. The strategy will also identify areas of potential economic growth for development and facilitate development planning.

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Secondly, enhancing the role of SOEs in investment to drive KEGA initiatives, thereby reducing the involvement of SOEs that compete with SMEs and other local businesses. SOEs will lead SMEs and activate the Vendor Development Programme (VDP) to attract regional and international investment.

The third strategy is to strengthen the involvement of the private sector in industrial development in Malaysia. The private sector is encouraged to play a leading role in driving industry growth including VDP operations. With this, large companies will help the expansion of SMEs, thus strengthening the business value chain and accelerate the process of transitioning to high-tech and value-added industries.

The private sector is also encouraged to provide upskilling and retraining to existing workers as well as basic skills training to prospective employees. Currently, 72.8% of the total employment is comprised of skilled and low-skilled workers.

Photographer: Rahman Roslan / VFarm 6-16 STRATEGIC THRUST 3 TRANSFORMING HUMAN CAPITAL

Human capital transformation is an effort to enhance the workforce in Malaysia through programmes focussed on professional training and retraining. These efforts will be undertaken at every level, from school to work environment.

3.1 BACKGROUND

A knowledgeable, skilled and innovative workforce is a crucial factor in the development of the country. Recognising the importance of human capital, the strategic thrust is developed to enhance the workforce through programmes focussed on professional training, talent development and skills retraining.

Presently, the development of human capital faces the challenge of bridging the gap between knowledge, skills and attitudes of graduates with industry needs. The gap has also created a mismatch between supply and demand in the labour market. In addition, the implementation of training and skills by various public, private institutions and state skill development centres has resulted in an uncoordinated national education and training landscape.

The transformation of human capital outlined in the strategy will create more skilled workforce and thus increase national productivity. Priority will be given to improving the quality of education and training as well as strengthening collaboration between training providers, industry and professional bodies to meet market needs.

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3.2 KEY ISSUES AND ANALYSIS OF CURRENT CONDITIONS

There is a gap between knowledge, skills and attitudes of graduates with the needs of the industry. This gap creates a mismatch between demand and supply in the labour market and makes it difficult for graduates to get jobs that meet their qualifications.

The imbalance also includes supply and demand in the labour market. According to the Mid-Term Review of the Eleventh Malaysia Plan, there were 112,300 job vacancies for the skilled job category compared to 306,808 graduates produced in 2017.

In addition, the educational and training landscape is not well coordinated as the programmes offered by public and private institutions as well as state skill development centres are similar. However, these progammes have different standards and lack specialisation.

3.3 STRATEGY RECOMMENDATIONS

Human capital transformation outlines four strategy proposals to address identified issues. The recommendations are as follows:

strengthening and expanding partnerships between training and industry 1 providers as well as professional bodies in setting curriculum and training courses to meet industry standards;

strengthening quality control mechanisms to ensure that academic 11 programmes comply with accreditation and quality standards;

encouraging the private sector to provide upskilling to existing employees 111 and industrial training that suits future graduates; and 1v cultivate student’s interest through career counseling programmes to participate in identified critical fields.

6-18 STRATEGIC THRUST 4 STRENGTHENING THE LABOUR MARKET AND INCREASING COMPENSATION OF EMPLOYEES

Labour market efficiency is an important factor in ensuring the country's economic growth. Efforts to coordinate the distribution of corporate profits need to be undertaken for workers to earn wages that are commensurate with productivity. Wage restructuring is required for employees to enjoy a decent standard of living. These efforts also include reducing the industry's dependence on foreign workers and promoting the recruitment of local workers.

4.1 BACKGROUND

The strengthening of the labour market and the increase in compensation of employees are defined as efforts to streamline the distribution of corporate profits or gross operating surplus to ensure workers can be compensated according to productivity. The restructuring of salary based on qualification needs to be implemented to attract locals into the workforce, thus enjoying a decent standard of living. In addition, this would reduce dependence on foreign workers.

The shift of foreign workers from the Dirty, Dangerous, Difficult (3D) category to other sectors illegally has affected local workers. Issues in labour market efficiency persist as the industry continues to maintain labour-intensive operations. In addition, higher wages abroad have forced locals to migrate to find jobs in those countries.

The strategic thrust will strengthen the labour market and increase the compensation of workers and the rights of local workers in Malaysia. Employees are also able to generate enough income to enjoy a decent standard of living.

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4.2 KEY ISSUES AND ANALYSIS OF CURRENT CONDITIONS

Migrants working in 3D category jobs have switched to jobs in other sectors illegally. This has put pressure on wage and employment opportunities for low skilled local workers. Employers are more likely to hire foreign workers than local workers to minimise operating costs.

Industries are reluctant to transit from labour-intensive to technology-based operations due to high investment cost. In addition, industries are required to invest to acquire appropriate technology equipment, provide skills training programmes to employees and improve business operations.

Unattractive wages and salaries in skilled jobs in Malaysia as well as lucrative offers abroad has resulted in the brain drain of skilled talents, which in turn has affected the domestic labour market efficiency.

4.3 STRATEGY RECOMMENDATIONS

The strategic thrust of strengthening the labour market and increasing compensation of employees outlines seven strategies to address identified issues. The recommendations are as follows: 1 reviewing minimum wage and salary policies periodically; 11 expanding the implementation of the Productivity-Linked Wage System (PLWS);

6-20 reviewing the regulation and permitted sectors on employing foreign 111 workers including registration system;

introducing and enforcing payroll system through registered financial 1v institutions to facilitate monitoring and management of foreign workers; v improving enforcement and monitoring mechanisms to prevent foreign workers from leaving the permitted sectors and occupations; v1 reviewing domestic investment promotion including tax-related incentives; and v11 expanding investment in R&D, technology adoption in production and human capital development.

Photographer: Firdaus Roslan 6-21 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

STRATEGIC THRUST 5 SOCIAL WELLBEING

Social wellbeing ensures that the welfare of all segments of society is protected, especially those categorised as economically vulnerable and B40.

5.1 BACKGROUND

Malaysia succeeded in reducing the poverty rate from 16.5% in 1989 to 0.4% in 2016. However, there are still pockets of poverty among the rakyat and households with insufficient savings, thus making this group economically vulnerable.

This group is also affected by lack of comprehensive social safety net coverage. In addition, uncoordinated social assistance systems have affected B40 from receiving the appropriate assistance.

Empowerment of the economically vulnerable needs to be prioritised to address poverty and social problems arising from financial constraints and pressures. The role of the Government is to ensure that the wellbeing of the rakyat is improved and no one is left behind from economic activities.

5.2 KEY ISSUES AND ANALYSIS OF CURRENT CONDITIONS

Poverty remains as one of the issues that need to be addressed as pockets of poverty still exist among the rakyat. Most of the poor households rely on single source of income, low education attainment and work in informal sectors. In addition, the national Poverty Line Income (PLI) is based on the 2005 methodology which does not reflect the current household consumption patterns, needs and demographics.

6-22 The lack of a comprehensive social safety net affects the vulnerable groups. According to BNM annual report in 2017, almost half of Malaysians could not afford to spend RM1,000 in case of emergency. This indicates that the rakyat, especially the B40 are not able to save money due to higher household expenditure relative to income growth.

The broad classification of B40 household income group creates difficulty for the Government to determine types of assistance required for household. In addition, database on the recipients that are provided by the various ministries and agencies are not fully integrated, resulting in inclusion and exclusion errors. This has led to the Government's assistance and incentives not reaching the intended target groups.

5.3 STRATEGY RECOMMENDATIONS

The strategic thrust on social wellbeing outlines six strategy proposals to address identified issues. The recommendations are as follows:

expanding the social security system to be more integrated and 1 comprehensive;

introducing mandatory retirement contribution scheme to workers in informal 11 sectors;

reviewing the methodology of PLI to be more relevant and to reflect current 111 situation;

promoting continuous national-scaled financial awareness programmes 1v including financial management awareness campaigns in schools and higher education institutions (HEIs); v refining information to determine more specific categories of B40 to provide better targeted assistance; and v1 integrating databases to ensure assistance can be provided to the targeted groups.

Inclusion error refers to unqualified household included in receiving assistance, 3 6-23 while exclusion error refers to qualified household excluded from receiving assistance. SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

STRATEGIC THRUST 6 REGIONAL INCLUSION

Regional inclusion is the Government's strategy to ensure that economic development is not geographically-centred. This strategy involves equitable development distribution to all states. The strategies in enhancing economic activities for each location are selected based on the strength and uniqueness of the area.

6.1 BACKGROUND

Malaysia has developed rapidly since the implementation of the NEP. However, high value-added economic activities are largely concentrated in the FT of Kuala Lumpur and Putrajaya, Selangor, Pulau Pinang and Johor. This disproportionate economic concentration has resulted in imbalance in development among states and regions as well as between urban and rural areas.

The population pattern is concentrated in urban areas and has led to a significant increase in urban population. Meanwhile, the economic potential in rural areas is underoptimised whilst access to basic infrastructure and facilities is inadequate.

Development in Malaysia needs to be more inclusive. Regional inclusion is the Government's strategy to ensure that economic development is not confined to specific areas. Overall, this strategic thrust focusses on the distribution of equitable and inclusive development.

6-24 6.2 KEY ISSUES AND ANALYSIS OF CURRENT CONDITIONS

Internal migration shows a pattern of increase in the urban population. This impacted negatively on various socioeconomic elements in urban and rural areas, including limited employment opportunities in urban areas and shortage of labour in rural areas.

The increase in urban population has raised house prices and contributed to urban poverty. This situation has also intensified competition for employment and elevated the cost of living. Long-term negative effects on the urban poor include questions of survival and low social mobility.

The economic potential in rural areas is underoptimised. In addition, the slow pace of socioeconomic development in rural areas and less developed states discourages private sectors from investing.

Access to basic utilities, digital infrastructure and roads in rural areas is not yet comprehensive while access to basic services such as healthcare, housing and education is still inadequate.

6.3 STRATEGY RECOMMENDATIONS

The strategic thrust on regional inclusion outlines nine strategy proposals to address identified issues. The recommendations are as follows:

mapping of potential economic areas for regional development planning as 1 shown in Figure 6.0; 11 determining measurable indicators of income growth, business progress and regional economic development in rural areas;

6-25 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

implementing a holistic rural development action plan by taking into account 111 ecosystem development, human resource/talent, financing, skills and entrepreneurship, logistics and communications; 1v developing suburban, rural areas and underutilised land to be competitive and creating more employment opportunities;

v developing several new pilot city models in line with the City Prosperity Index;

creating new industries in rural areas to value add existing industries and v1 encouraging diversification of businesses apart from agricultural industry; v11 developing regional economic ecosystem including enhancing entrepreneurship programmes, encouraging startups and boosting rural industry competitiveness to bridge urban-rural economic disparity; v111 improving access to basic facilities and infrastructure in rural areas such as hospitals, health centres, schools, roads, jetties, bridges, markets and telecommunication infrastructure; and 1x accelerating development of affordable housing for better livability.

6-26 PROPOSED DISTRIBUTION OF KEY ECONOMIC 6.0 GROWTH ACTIVITIES, KEGA The figure illustrates the proposed state-based economic focus area under the Strategic Thrust of Regional Inclusion.

PERLIS

• Borders and logistic economy • Ecotourism • High-valued agriculture • Renewable energy

PENANG

• Logistics hub • High technology industry • Health tourism • Heritage and Tourism • Technology centres of excellence

PERAK

• Ecotourism and heritage tourism • High technology fisheries and livestock • Rural industries • Creative industry economic hub

SELANGOR

• Manufacturing, automotive and MRO • Industry 4.0 hub and hi-tech parks • Ports and logistics • Digital economy and disruptive technology • Smart agriculture

FT KUALA LUMPUR

• ASIA Tourism (ASIA Gateway) • Regional financial hub • Islamic fintech 2.0 hub

FT PUTRAJAYA

• Federal Government Administrative Centre • Diplomatic Hub

NEGERI SEMBILAN MALACCA

• Ecotourism and heritage tourism • Ecotourism and heritage tourism • Malaysia Vision Valley • Halal hub • Smart and high-valued agriculture • Smart city

6-27 SHARED PROSPERITY VISION 2030 6 CHAPTER 6: Strategic Thrusts

KEDAH SABAH

• Borders and logistics economy • Ecotourism • Ecotourism and heritage tourism • Borders economy • Modern agriculture and livestock • Downstream petroleum • Aerospace industry processing • Commodity economy and downstream products KELANTAN • Fisheries and aquaculture • Borders and logistics economy • Cultural and rural economy • Heritage tourism • Rural manufacturing industries • Agrotourism and ecotourism

TERENGGANU

• Commodity economy and downstream products • Island and coastal tourism • Coastal economy and fisheries • Secondary educational hub • Downstream petroleum processing

PAHANG

• Ecotourism • Commodity economy and downstream products • Modern mining • Transportation and logistics hub • High technology agriculture

SARAWAK SARAWAK

• Ekonomi komoditi • Commodity economy and • Petroleum dan LNG downstream products • Pelancongan desa dan alam • Petroleum and LNG • Industri desa • Ecotourism JOHOR • Ekonomi komoditi dan produk • High technology agriculture hiliran and livestock • Straits of Malacca gateway • Southern region• Pertanianeducational dan hub penternakan (Logistics hub and • Renewable energy transhipment) • Food crop hub teknologi tinggi • Ecotourism and heritage • Downstream petroleum-related tourism activities

Source: Institut MASA 6-28 STRATEGIC THRUST 7 SOCIAL CAPITAL

Social capital is the Government's effort to strengthen the rakyat’s participation in societal activities that will raise the rakyat’s confidence level and trust towards society and national institutions. In addition, social capital refers to the empowerment of youth in the society. Discussion on national and new Malay narratives as well as unity among rakyat of diversified races and religions constitute a part of efforts to develop solid social capital in Malaysia.

7.1 BACKGROUND

The social capital thrust discusses the national narrative and the role of the community in ensuring that the target of Shared Prosperity is achieved and national unity is strengthened. The national narrative is based on the principles of the Federal Constitution and the Rukun Negara that support social contracts to unite the nation. The implementation of social capital needs to be accelerated in terms of economic, institutional and social models through Shared Prosperity Vision.

The challenges identified in this strategic thrust are related to different ideologies among the rakyat, lack of patriotism among the youth and differences in understanding among ethnic groups. All of these challenges have led to persistent and prolonged sensitive issues, including those related to religion, race and education that need to be addressed. Appropriate measures and mechanisms are necessary in tackling these issues to strengthen unity.

Through this social capital, the Government will increase the rakyat's involvement in community activities such as community-based organisations (CBOs), neighbourhood associations and volunteer activities that will enhance the people's confidence and trust in community and state institutions. Nation building involves development in all aspects including the inculcation of the spirit of diversity by celebrating values and respecting differences of opinion. This is important for the formation of a united, progressive and active community.

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7.2 KEY ISSUES AND ANALYSIS OF CURRENT CONDITIONS

The differences in views among the rakyat should not affect the social texture towards shaping Malaysians in celebrating ethnic and cultural diversity. Involvement of youth in discourse on national issues needs to be enhanced through the provision of specific platforms. This involvement is necessary to foster the spirit of patriotism among the youth for young minds to propel Malaysia into a developed nation.

The polarity in cultural understanding between ethnic groups has led to various demands being made that do not benefit all Malaysians. A more objective view is needed in order to work towards developing an integrated and holistic socioeconomic state.

7.3 STRATEGY RECOMMENDATIONS

The strategic thrust of this social capital outlines five strategic proposals to address the identified issues. The recommendations are as follows:

strengthening the role of the CBOs in balancing national issues by 1 developing national-level platforms such as town hall, national consultation councils and the establishment of the Majlis Muafakat Ummah; 11 fostering youth involvement in community activities such as gotong-royong and community service as well as local economic development; 111 enhancing understanding and creating lasting harmony among various ethnic and religious groups in Malaysia; 1v fostering a sense of belonging by celebrating diversity and respecting differences of ideologies; and

strengthening education policies and various unity initiatives to ensure v that the unity and integration among Malaysians is maintained.

6-30 7 CHAPTER 7 Enablers of Shared Prosperity

Introduction ENABLER 1 Fiscal Sustainability ENABLER 2 Financial Capital ENABLER 3 Effective Institutional Delivery ENABLER 4 Governance and Integrity ENABLER 5 Education and Technical and Vocational Education and Training ENABLER 6 Big Data ENABLER 7 Sustainability ENABLER 8 Enlightened Society CHAPTER 7 Enablers of Shared Prosperity

INTRODUCTION

The Shared Prosperity Vision 2030 has eight enablers to accelerate the implementation process of the seven strategic thrusts in an effort to achieve the targets. These enablers are developed based on 15 Guiding Principles considering efforts to ensure the success of initiatives and programmes. The eight enablers are as follows:

Photographer: Ishan 7-01 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

CAPABILITIES, RESOURCES AND CATALYSTS CONTRIBUTING TO SUCCESS OF SHARED PROSPERITY VISION

Financial Effective Capital Institutional Delivery Expansion of businesses Improvement in through holistic and implementation of initiatives SME-friendly financing and outcome-based programmes

Fiscal Governance Sustainability and Integrity Sustainable Strengthening management of governance government through finance to transparency strengthen and investors and accountability to market foster trust of the confidence rakyat

SHARED PROSPERITY VISION ENABLERS

Education Enlightened & TVET Society Increase in skilled A lifelong learning and culture through highly-educated Big Data Sustainability continuous learning, workforce, learning Policy making guided National intellectual society and by big data inclusive development which discourse, outcome-based of empirical facts as is eco-friendly and dialogues and education well as unified and gives emphasis to awareness to integrated data conserving and enhance system preserving natural knowledge, resources experience sharing and empathy

7-02 ENABLER 1 FISCAL SUSTAINABILITY

Fiscal sustainability is defined as the ability to maintain the Government's financial position in a credible manner without compromising the ability to manage its liabilities and commitments in the long run. Efficient fiscal management determines the country’s rating by international agencies to build up investor and market confidence.

1.1 ISSUES AND CHALLENGES

Limited fiscal space continues to restrict public sector funding for implementing development programmes and projects. Government revenue collection is still not in line with economic growth. The country's revenue structure, which still relies on direct taxes and small tax base, has limited the collection of Government revenue. The re-introduction of Sales and Service Tax (SST) to replace Goods and Services Tax (GST) has also had an impact on revenue collection. In addition, the country is still dependent on petroleum-based revenues and commodity trade which are exposed to global commodity price instability as shown in Figure 7.0. The country's fiscal resilience will continue to decline if tax restructuring is not implemented.

7-03 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

Federal Government Revenue Structure, 7.0 2009-2019 (% of total revenue)

14.6 15.7 21.7 35.4 30.9 Petroleum 41.3 18.4 16.9 19.2 16.0 20.1 19.2 19.4 9.8 19.0 8.4 7.6 Non 7.5 Petroleum 47.6 47.3 49.3 44.7 37.8 32.2

2009 2010 2016 2017 2018 2019

Direct Taxes except PITA SST/GST Others Petroleum

The widening fiscal deficit is also due to increase in expenditure being higher than the increase in revenue collected on account of ineffective and imprudent spending management as shown in Figure 7.1. In addition, the implementation of off-budget mega projects funding coupled with weakness in monitoring and delay in project implementation have led to additional costs to the Government.

Source for Figure 7.0: Ministry of Finance Malaysia 7-04 Federal Government Revenue and 7.1 Expenditure, 2009-2019

RM billion % growth

400 20.0

300 15.0

200 10.0

100 5.0

0 0

-100 -5.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

-0.7 0.6 16.1 12.1 2.6 3.4 -0.7 -3.0 3.8 5.7 12.4

5.2 -1.0 12.0 10.2 0.4 2.2 0.5 -2.2 4.1 9.3 9.6

Spending Outcome % Spending % Outcome

Increased Government debt has also hindered the country's development plans and eroded investors’ confidence. Debt increases, contingent liabilities and commitments made through the implementation of public-private partnership projects have also increased the Federal Government's debt level. In 2018, debt levels including Government guarantees remained high, amounting to RM1.1 trillion or 75.4% of GDP as shown in Figure 7.2.

Source for Figure 7.1: Ministry 7-05 of Finance Malaysia SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

Federal Government Debt and Liability 7.2

RM1,087.3 billion RM1,090.8 billion (79.3% to GDP) (75.4% to GDP)

260.1 184.9 32.2 38.3 132.7 102.1

Other liabilities (PPP, PFI and PBLT)

1Malaysia Development Berhad 686.8 741.0 (Net debt)

Committed Government Guarantees

Federal Government debt 2017 2018

1.2 STRATEGY RECOMMENDATIONS

Fiscal reform is crucial to lay a strong foundation for more sustainable and inclusive growth. However, these reforms will be balanced by the need to sustain growth and ensure quality public service delivery for the wellbeing of the rakyat. Proposed strategies to ensure a sustainable fiscal position are as follows:

Source for Figure 7.2: Report on Government Debt and Liabilities Position, Parliament Special Select 7-06 Committee on Budget, Parlimen Malaysia, 2018 introducing new initiatives to increase revenue and improve tax 1 compliance and tax efficiency as well as widening tax base; 11 strengthening Government expenditure management for better transparency, especially in determining the needs for any mega project based on a cost-benefit analysis;

introducing a mechanism for budgetary management and monitoring 111 under the purview of Parliament as the Government's budget arbitrator; 1v setting a threshold for operating expenditure; strengthening procurement processes for supplies and services v including implementation of open tenders; and

improving public sector debt management system to ensure greater v1 integrity and responsibility.

7-07 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

ENABLER 2 FINANCIAL CAPITAL

Financial capital is defined as the funds provided by certain parties to support SMEs. This enabler is introduced as an effort to reduce wealth disparities, enhance SMEs capabilities in the supply chain and encourage its involvement in business through SMEs-friendly financing systems.

2.1 ISSUES AND CHALLENGES

Most financing institutions are not inclined towards approving SMEs loan applications from sole proprietorships because of their high credit risk due to unlimited liability. According to BNM Annual Report 2016, 25.1%1 of loan applications by SMEs were rejected. The Establishment Survey Report of 2015 by DOSM showed that 73%2 of SMEs used private funding sources. Among the factors that deter SMEs from obtaining financial assistance were poor documentation system, particularly in accounting and financial management as well as commercially non-viable businesses (24%), bad credit profile (18.5%) and poor loan repayment ability (1.5%)3.

Currently, SMEs face numerous problems due to information gaps between financing agencies and applicants. The substantial information gaps are caused by outreach shortcomings in the delivery of Government programmes. The weakness of this outreach has resulted in SMEs failing to obtain accurate funding information.

SMEs are also focussed on commercial banking institutions and unaware of other financing schemes such as alternative lending schemes, which include cooperatives and agency financing programmes. The data shows utilisation of alternative funding stood at RM3.3 billion as compared to the total RM25.1 billion4 of SMEs funding requirements.

1 Financial Stability and Payment Systems Report by Bank Negara Malaysia, 2016. 2 Economic Census Report, Department of Statistics Malaysia, 2016. 7-08 3 Survey by SME Corporation Malaysia. 4 Annual Report by Bank Negara Malaysia, 2016. Poor operational management of SMEs also contributed to the lack of success due to failure to adopt best practices and standards. A set of standards for SMEs operation and management, particularly micro businesses needs to be introduced as a benchmark for SMEs.

2.2 STRATEGY RECOMMENDATIONS

The inability of SMEs to conform to the needs of the new economy is exacerbated by their failure to adopt excellent business practices, utilise technology and create a skilled workforce. The Government's aim to create a high value economy will not be achieved if the institutions that provide capital financing are unable to address this problem. The proposed strategies to strengthen access to financial capital are as follows:

introducing alternative systems for credit evaluation based on digital 1 footprint such as online purchases, internet usage and social media;

reviewing and improving policies to ensure successful capital financing 11 for SMEs to address issues of classification of SMEs business categories;

rationalising funding institutions to meet the demands of SMEs 111 participation in new sectors and economic activities;

strengthening SMEs management support programmes with the 1v provision of professional services at affordable fees through accounting services with resource sharing methods;

encouraging accounting firms to provide accounting training to SMEs; v and

encouraging the transition of industrial business to scale from micro v1 companies to SMEs and from SMEs to large corporations by easing the criteria and funding approval conditions that facilitate their expansion.

7-09 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

ENABLER 3 EFFECTIVE INSTITUTIONAL DELIVERY

Effective communication and successful policy implementations are among the key determinants of initiatives undertaken by the Government. This enabler is developed to ensure successful planning and implementation as well as re-engineering of outcome-based Government programmes to warrant the success of Shared Prosperity Vision. Improvements of Government service deliveries are essential in reducing bureaucracy through simplifying and streamlining work systems as well as procedures on top of performance measurement based on key result indicators (KRIs).

3.1 ISSUES AND CHALLENGES

Inefficiencies in public service delivery pose a challenge to the Government in dealing with perception and understanding among the rakyat, which may lead to public distrust. In addition, patriotism needs to be instilled within the youth. Lack of coordination between ministries and agencies due to overlapping functions and roles will result in an increase of Government spending.

3.2 STRATEGY RECOMMENDATIONS

The proposed capacity building strategies for effective institutional delivery are as follows:

strengthening communication channels for the delivery of accurate and 1 updated Government information and policies;

11 fostering a spirit of patriotism and loyalty for the country; and 111 streamlining the functions and roles of the Government.

7-10 ENABLER 4 GOVERNANCE AND INTEGRITY

Good governance and high integrity should be integral elements in national administration. This enabler will increase the rakyat’s trust in the Government to continue administering and managing the nation.

4.1 ISSUES AND CHALLENGES

Rampant corruption has led to significant public distrust of the Government. The intervention of stakeholders in the administration of the country, has affected the efficiency of public service delivery. Weaknesses in the management and monitoring of Government projects have also led to leakages in Government spending.

4.2 STRATEGY RECOMMENDATIONS

The proposed strategies for governance and integrity enabler are as follows:

raising awareness on integrity and accountability aspects to curb corrupt 1 practices; 11 strengthening the governance system as well as increasing transparency and accountability of Government agencies; 111 improving monitoring and enforcement mechanisms; and formulating policies to deter stakeholders from interfering in Government 1v administration and to prevent economic sabotage.

7-11 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

ENABLER 5 EDUCATION AND TECHNICAL AND VOCATIONAL EDUCATION AND TRAINING

The Education and Technical and Vocational Education and Training (TVET) enabler is being developed to increase the number of skilled workers to meet the needs of industry. This enabler will also create a highly educated workforce and help build a community that inculcates lifelong learning.

5.1 ISSUES AND CHALLENGES

A key issue in education is the low learning outcomes of students. The quality of education in Malaysia needs to be improved to enhance the development of the country’s human capital. The lack of physical and digital infrastructure as well as comprehensive online learning impedes the overall progression of education.

TVET training is currently being implemented in silos by various public and private institutions as well as state skills development centres. The situation has caused confusion among the public and stakeholders. In addition, the existence of two accreditation bodies, namely, the Malaysian Qualifications Agency (MQA) and the Department of Skills Development (JPK), has resulted in dissimilar standards, rating systems and quality of TVET programmes.

5.2 STRATEGY RECOMMENDATIONS

The proposed strategies for education and TVET enabler are as follows:

7-12 improving education structures and systems, especially in terms of 1 language proficiency and learning outcomes;

strengthening physical and digital infrastructure as well as online 11 learning platforms and modules;

improving the quality and capacity of teachers so as to maximise student 111 achievement; 1v encouraging student enrolment in the TVET stream; and strengthening the infrastructure and support learning system for special v needs to ensure a more inclusive learning system.

Photographer: Clint Bustrillos 7-13 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

ENABLER 6 BIG DATA

Big data is one of the major contributors towards changes in the method of decision-making and business transactions. Due to technological advancement, this enabler has emerged as a driver of information integration and consolidation as well as data- and empirically-based policy-making. In addition, technology readiness and usage of big data have encouraged the growth of innovation, value-added industry and improved quality of Government service delivery. This element is crucial in ensuring the development of the digital economy in tandem with the current global trend towards national economic growth.

6.1 ISSUES AND CHALLENGES

Malaysia still faces challenges in the implementation of big data due to rapid growth of technologies in developing digital infrastructure, including data centres. High investment and collaboration between the Government and industry is required to provide big data facilities. Furthermore, high-skill workers in data analytics are needed to support this initiative. At the same time, awareness of the effective and smart use of data is important in ensuring confidentiality, facilitating service delivery and supporting effective decisions.

7-14 6.2 STRATEGY RECOMMENDATIONS

The proposed strategies for big data enabler are as follows:

reviewing existing legislation and formulating policies in providing a 1 holistic digital ecosystem;

preparing new business models in developing sustainable digital 11 infrastructure including data centres;

providing modules for upskilling and reskilling at training institutions and 111 industries;

establishing collaboration between Government and industry to share 1v expertise; and

encouraging collaboration between Government, industry as well as v community to implement awareness programmes on the wise and effective use of data.

Photographer: Charles 7-15 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

ENABLER 7 SUSTAINABILITY

Sustainability harmonises socioeconomic development with the preservation of the environment and natural resources to meet the needs of the present generations without neglecting the future generations. This enabler is an effort to drive national development through green growth, which emphasises low carbon development, resource efficiency, resilience and inclusivity. The responsibility of preserving the environment and sustainability of natural resources is not entirely on the Government but also the society at large in line with Shared Prosperity Vision aspirations.

7.1 ISSUES AND CHALLENGES

The implementation of policies by ministries and agencies de-emphasises the importance of environmental preservation and efficient use of resources. This is caused by the failure to realise the significant value of the environment as compared to that in the economic and social sectors. High commitment is required in enhancing the practice of shared responsibility among stakeholders. Furthermore, while EIA is important, it is only focussed on specific projects and does not cover the impact of the ecosystem as a whole.

As a result of rapid development, the country is facing challenges to balance between population growth and the increasing demand for resources. This has resulted in unsustainable lifestyles and poor consumption habits leading to overconsumption of resources and increase in residual waste production.

7-16 7.2 STRATEGY RECOMMENDATIONS

The proposed strategies for sustainability enabler are as follows:

reviewing environmental laws and legislation by taking into account 1 current issues and future challenges;

strengthening and coordinating the enforcement of environmental laws 11 and legislation at various levels of Government;

improving the methodology of EIA implementation by taking into account 111 the impact on the ecosystem as a whole; and

maximising resource utilisation efficiency and minimising waste 1v production through the concept of circular economy at various stages of production and consumption.

7-17 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

ENABLER 8 ENLIGHTENED SOCIETY

Enlightened society aims to inculcate lifelong learning and to foster continuous learning through intellectual discourse, dialogue and awareness programmes in order to enhance knowledge, experience sharing and empathy amongst Malaysians.

8.1 ISSUES AND CHALLENGES

Four challenges have been identified in ensuring an enlightened society as follows:

lack of meaningful public engagement such as consultation process 1 before a policy or project is implemented due to minimal community participation in the process of national development; 11 there are segments of society that are unable to understand the concept of national identity and nation state. Issues of ethnicity and religions may cause conflict if left unchecked;

analytical thinking among the rakyat needs to be improved, particularly 111 starting in schools. Failure to do so will limit, creativity and impede intellectual discourse; and

culture of high integrity is not a norm yet and thus not entrenched among 1v the rakyat.

7-18 8.2 STRATEGY RECOMMENDATIONS

The proposed strategies for enlightened society enabler are as follows:

encouraging publishers and media agencies to publish educational 1 content with the participation from civil society and artists; 11 formulating national media-related policies to educate the mature use of media for the purpose of education, intellectual discourse, civic learning and unity; 111 encouraging holistic societal engagement in policy or project implementation processes; 1v campaigns to build a narrative of nation state identity; and strengthening basic modules and syllabi to nurture students' ability to be v analytical, critical and articulative in shaping social maturity.

7-19 SHARED PROSPERITY VISION 2030 7 CHAPTER 7: Enablers of Shared Prosperity

Photographer: Susan Yin 7-20 8 CHAPTER 8 Targets and Measures of Shared Prosperity CHAPTER 8 Targets and Measures of Shared Prosperity

INTRODUCTION

The Government of Malaysia has decided to develop an outcome-based national development plan. Setting clear targets and measurement indicators will be instrumental in determining the success of Shared Prosperity Vision 2030. The NEP had set targets for Bumiputera equity ownership and poverty eradication as determinants of its success. In addition, over the past decades, Malaysia has put emphasis on the growth of the GDP as a national economic achievement indicator. In light of this, there is a crucial need for Shared Prosperity Vision to set comprehensive targets and indicators that will have direct impact on the rakyat.

KEY ECONOMIC TARGETS

Shared Prosperity Vision is an outcome-based approach focussing on the country's achievements beyond the economy. It is a holistic vision that encompasses all aspects of development including infrastructure, economy, government delivery system, environment, societal values and education. All targets that will be used as Shared Prosperity Vision outcome-based indicators will be matched with future strategies. The process of implementing, monitoring and measuring key indicators of the vision will be undertaken through the creation of a detailed and dynamic dashboard. These will be driven by 10 key targets and over 40 outcome-based targets with 10 initial targets identified as follows:

1 2

Real GDP expands at an average of 4.7% Contribution of SMEs and micro per annum at constant prices and is businesses to GDP by 50% as compared targeted to reach RM3.4 trillion at nominal to 38.3% in 2018; prices;

8-01 SHARED PROSPERITY VISION 2030 8 CHAPTER 8: Targets and Measures of Shared Prosperity

3 4

Contribution of Bumiputera enterprises of Average decent living income 20% to GDP; (expenditure-based) not less than RM5,800 per month for B40 household group;

5 6

Monthly median wage among Bumiputera, Monthly median household income ratio of Chinese and Indian ethnic groups is Bumiputera, Chinese and Indian ethnic targeted at 1:1:1 ratio. The current monthly groups is targeted at 0.9:1:1. In 2016, median wage ratio of Bumiputera to income disparities between Bumiputera Chinese is 0.88:1 while that of Indian to and Chinese at the ratio of 0.74:1 and Chinese is 0.82:1 in 2016. These ratios Indian to Chinese at the ratio of 0.81:1; reflect that wage disparities among ethnic groups still persist and need to be equalised;

7 8

The targeted ratio of financial assets per CE to GDP is 48%, which is equivalent to capita of Bumiputera to Chinese is 0.6:1 the current high-income countries. In 2018, while Indian to Chinese is 0.8:1. This is to CE to GDP was 35.7% indicating that address the existing wealth disparities wealth was not well distributed between between Bumiputera and Chinese at the employees and capital owners; ratio of 0.5:1 and Indian to Chinese at the ratio of 0.7:1;

8-02 9 10

Addressing regional development disparity, GINI coefficient value at 0.34. This target is among others, targeting regional in tandem with Shared Prosperity Vision development ratios based on GDP per efforts, which focus on reducing the capita. The ratios are measured by disparity between high and low income comparison to the central region as groups. follows:

Current Ratio and Regional Development 8.0 Targets

REGION CURRENT TARGET

Northern 2.1 1.6 East Coast 2.7 2.0 Central 1.0 1.0 Southern 1.7 1.4 Sabah 2.6 1.5 Sarawak 1.3 1.2

Note: Central region covers FT of Kuala Lumpur and Selangor state while the southern region comprises Johor, Melaka and Negeri Sembilan.

The setting of these 10 initial targets will become the basis of the Government’s initiatives that will be facilitated by outcome-based monitoring economic growth, and improving the standard of living of the rakyat. The setting of targets is a shift from output-based monitoring to performance-based monitoring.

Source for Table 8.0: Analysis 8-03 by Institut MASA, 2019 SHARED PROSPERITY VISION 2030 8 CHAPTER 8: Targets and Measures of Shared Prosperity

Photographer: Firdaus Roslan 8-04 9 CHAPTER 9 Bumiputera Outcomes CHAPTER 9 Bumiputera Outcomes

INTRODUCTION

Shared Prosperity Vision is primarily aimed at in low-value industries. addressing economic disparity issues that hamper Malaysians. Based on statistics, In addition, the majority of the population in Bumiputera rank the lowest in wealth less-developed states are Bumiputera. The ownership and income and are therefore the emphasis on equitable outcome is to ensure most affected in terms of economic disparity. that Bumiputera achieved equitable Bumiputera constitute 71.3% of the national socieconomic conditions with other ethnics. B40 household income and most are involved

CHALLENGES FOR BUMIPUTERA DEVELOPMENT

The implementation of previous Bumiputera empowerment agenda has had no holistic impact due to economic sabotage activities such as leakages in Government procurement, corruption, abuse of power and the selling of licences to third parties. This has resulted in negative perception towards Bumiputera empowerment agenda even as economic disparities affecting Bumiputera continue to widen as compared to other ethnic groups.

Among key challenges to Bumiputera outcomes are as follows:

1 Abuse of Bumiputera identity by some individuals and companies to reap easy profit;

2 Bumiputera property ownership in urban areas remains low and Bumiputera risk being marginalised from mainstream economic development due to high property prices;

3 Bumiputera recruitment in the private sectors remains low due to discriminatory practices in job recruiting;

9-01 SHARED PROSPERITY VISION 2030 9 CHAPTER 9: Bumiputera Outcomes

4 Over dependence on Government procurement by most Bumiputera contractors due to minimal opportunities to compete in the private sectors; and

5 Monopolistic practices in the supply chain among the main causes restricting the competitiveness of Bumiputera and their enterprises.

WAY FORWARD

Various initiatives will be implemented to strategies and initiatives outlined in Shared increase Bumiputera participation in the Prosperity Vision. The measures include Government procurement process, improvement in policies and workers’ particularly for high-value and high-impact recruitment processes as well as private contracts. In addition, focus will be given to sector procurement particularly putting an create high-paying jobs for Bumiputera. end to discriminatory practices towards Bumiputera. The private sectors and SOEs need to play a proactive role in ensuring equitable outcome Monopoly issues in the supply chain will be for Bumiputera in tandem with policies, addressed to prevent the hindering of

Jurufoto: Deva Darshan 9-02 Bumiputera from opportunities for healthy systematically adopted in achieving Shared competition in businesses and enterprises. Prosperity Vision targets. Bumiputera Development policies and strategies in urban themselves must undergo major mindset and areas must also factor in Bumiputera attitude change by showing firm and strong capability to own properties in these areas, commitment to enhance their productivity. In so as not to marginalise them from the these efforts to increase Bumiputera country’s mainstream development. The rural outcomes, integrity, leakages, corruption and economic centres need to be strengthened economic sabotage issues must be to boost growth and create new jobs. holistically addressed without fear or favour.

In addition, economic development needs to In determining the achievement of be focussed on less-developed states which Bumiputera outcomes, the implementation of also have high population of Bumiputera policies, strategies and initiatives under such as Perlis, Kedah, Kelantan, Terengganu, Shared Prosperity Vision will be Sabah and Sarawak. Rapid development in systematically monitored and evaluated. It these states will provide more economic will also be subject to a more stringent opportunities and high-paying jobs to oversight in line with the protocol adopted for Bumiputera. measuring achievements at all levels in the 12MP and 13MP. Bumiputera outcomes in all strategic thrusts and enablers need to be prioritised and

9-03 SHARED PROSPERITY VISION 2030 9 CHAPTER 9: Bumiputera Outcomes

Photographer: Nuar Yusli 9-04 10 CHAPTER 10 Polarity Management

Target Groups B40 group, Poor and Economically Vulnerable Community in Economic Transition Indigenous Community Bumiputera in Sabah and Sarawak People with Disabilities Youth Women Children Senior citizens CHAPTER 10 Polarity Management

In line with the concept of equality underlying Shared Prosperity Vision 2030, certain groups will be given priority, in order to improve their socioeconomic status and to ensure that no one is left behind.

Polarity management is a model of managing issues faced by the minority and specific target groups. The management of polarities is important to ensure issues that are raised can be handled effectively without jeopardising national harmony.

In developing a polarity management model under Shared Prosperity Vision, several key target groups have been identified:

B40 group, Poor and Economically Vulnerable

Senior 1 Community in Citizens Economic 9 2 Transition

Children Indigenous 8 TARGET 3 Community GROUPS

Bumiputera Women 7 4 in Sabah and Sarawak

Youth 5 Persons with 6 Disabilities

10-01 SHARED PROSPERITY VISION 2030 10 CHAPTER 10: Polarity Management

B40 group, Poor and Economically Vulnerable 1 The main groups that need to benefit from various forms of Government assistance, including programmes to increase income, are B40 group, poor and economically vulnerable.

In addition, access to quality education for this group must be given priority as it provides them with the opportunity to change their socioeconomic status and improve their living standards.

Targeted assistance programmes based on appropriate exit policies will be designed to promote social mobility of this group. This approach is necessary because different groups have different features and requirements. In this way, targets of providing a decent standard of living for all rakyat can be achieved, while reducing their dependency on Government assistance.

Community in Economic Transition

2 Community in economic transition involves vulnerable groups including communities that have migrated from estates, urban poor groups and squatters as well as rural people in urban and industrial settings.

Among the issues affecting these groups are home ownership, access to basic facilities and quality education. These issues need to be addressed thoroughly, so as to improve their social mobility and increase their participation in higher-income economic activities.

Indigenous Community

3 Government policies and initiatives relating to the wellbeing of indigenous communities must be given priority so that they can enjoy the benefits of national economic development.

10-02 A large proportion of indigenous communities are still facing poverty on account of lagging behind in education, upskilling and entrepreneurship.

Polarity management involving these communities must therefore be focussed on efforts to improve education achievement, healthcare, access to roads, infrastructure and facilities.

Granting of land title to the indigenous should also take into account their opportunity to participate in the development stream and the right to continue practising their culture and heritage. Therefore, issues on indigenous land ownership need to be given due consideration and a specific policy should be formulated to address them.

Bumiputera in Sabah & Sarawak

4 Government policy in managing polarities should promote the preservation of the rights of the natives of Sabah and Sarawak taking into account provisions agreed upon in the Malaysia Agreement 1963 (MA63).

Among key issues for this target group is the Native Customary Rights (NCR), particularly in ensuring that any development process does not affect the recognition of NCR.

In addition, access to high quality roads, basic infrastructure, health and quality education especially for the rural communities in Sabah and Sarawak should be given priority.

Persons with Disabilities

5 The Government is committed to upholding the rights of persons with disabilities through the ratification of the United Nations Convention on the Rights of Persons With Disabilities (CRPD) and the enactment of domestic law under the Persons With Disability Act 2008. Polarity management initiatives should focus on access to facilities that maintain the safety of the disabled especially in public areas, in line with universal design principles.

10-03 SHARED PROSPERITY VISION 2030 10 CHAPTER 10: Polarity Management

In addition, to ensure the survival of the disabled, improving the quality of life and wellbeing of the disabled should be encouraged through an inclusive approach in the community.

Special education schools to improve the skills of the disabled should be provided based on their needs. In this regard, education and skills training that focus on survival should be expanded to enhance self-sufficiency capability.

Youth

6 The Youth are an important target group in polarity management as they play a key role in determining the country's future.

A key issue that needs to be focussed is the creation of high-income employment opportunities commensurate with their qualifications, skills and talents.

Low salary levels make it difficult for the youth to achieve financial stability in life. Consequently, they are unable to own homes in spite of various government programmes to facilitate home ownership.

The youth, as the future of the nation, must be equipped with knowledge and skills and further encouraged to be involved in entrepreneurship. The youth will be further empowered to face socioeconomic challenges through the creation of more jobs and business opportunities, especially through entrepreneurship and fundraising activities.

Women

7 In managing polarities involving women as a target group, the Government has formulated gender-mainstreaming policy as one of the priorities to ensure effective policy implementation.

10-04 Government policies based on gender sensitivity will increase women's participation and leadership in the public and private sectors, especially at the highest management level. The participation of women in national development will optimise the use of labour resources, and contribute to economic growth.

In order to ensure women's rights are protected, the Government needs to take domestic violence cases seriously by looking at the effectiveness of laws that provide protection to victims. In addition, child care programmes should be streamlined to ensure that women's involvement in the labour market is not affected by childcare issues for married women.

Emphasis on the empowerment of housewives including single mothers as a pillar of the family institution as well as the shapers of a holistic future generation should be embedded in the formulation of Government policies, strategies and initiatives.

Children

8 Polarity management should emphasise specific policies for children in protecting their rights and safety because of their vulnerability in facing socioeconomic challenges. Studies show that facing these challenges will have long-term effects, including on mental growth.

The findings of a United Nations Children’s Fund (UNICEF) study show children living in low-cost apartments in urban areas tend to have low levels of nutrition. Special programmes on children's nutrition are therefore essential to ensure that the country's health policy can address health problems of this group more effectively.

The implementation of Government policies should be streamlined to ensure that documentation and birth certificate issues are resolved to enable children to gain access to education and healthcare.

10-05 SHARED PROSPERITY VISION 2030 10 CHAPTER 10: Polarity Management

Senior citizens

9 Polarity management of senior citizens as a target group should entail the provision of space to ensure their wellbeing. The life expectancy of Malaysians is increasing and Malaysia is expected to become a country with an ageing population by 2030.

The issue of accessibility to the use of facilities for senior citizens is mainly on health and social care. Careful monitoring of senior-care homes and community centres needs to be implemented to ensure their welfare is taken care of. The Government needs to set specific policies to ensure that the elderly have sufficient savings to sustain themselves in old age.

10-06 C CONCLUSION C Conclusion

Malaysia requires a change in the economic framework and direction in order to allow the country to realise its full economic potential in a sustainable manner, so that the outcome can be shared fairly and equitably by all the rakyat. This can only be achieved by changing and adapting the economic ecosystem to better meet market requirements and ensure sustainable economic growth. The benefits of this new economic approach should be distributed in a fairer and more equitable manner to further reduce income disparities between income groups, ethnicities, regions and supply chains. These efforts include formulating policies and implementing capacity building programmes as well as effectively facilitating SMEs, markets and business ecosystems.

A fair economic distribution should guarantee the rights and needs of the low-income, economically vulnerable and marginalised groups by focussing on enhancing their capabilities, and thereby improve their wellbeing. In addition, the Government has to strengthen governance and integrity, increase understanding of the nation’s history and its narrative, strengthen social capital, and raise awareness of the bond that will unite us as Malaysians. These important elements will be developed through Shared Prosperity Vision 2030 with a firm resolve to reduce the economic disparities among income groups, ethnicities, regions and supply chains and provide a decent standard of living for the rakyat. This vision will ensure that Malaysia will be peaceful, harmonious and united and become an important economic centre of Asia.

11-01 Photographer: Izzudin Helmi Adnan 11-02 G GLOSSARY Glossary Abbreviation Methodology Structure of Committees Development Team Documentation Management Team G Glossary

GLOSSARY ABBREVIATION

3D Dirty, Dangerous, Difficult 4IR Fourth Industrial Revolution 12MP Twelfth Malaysia Plan 13MP Thirteenth Malaysia Plan AI Artificial Intelligence AR Augmented Reality ASEAN Association of Southeast Asian Nations B40 Bottom 40% Household Income Group BNM Bank Negara Malaysia CBOs Community-Based Organisations CE Compensation of Employees CEDAR Centre for Entrepreneur Development and Research COEs Centres of Excellences CPI Corruption Perception Index CPTPP Comprehensive and Progressive Agreements for Trans-Pacific Partnerships CRM Customer Relation Management CRPD Convention on the Rights of Persons With Disabilities DIA Direct Investment Abroad DOSM Department of Statistic Malaysia EIA Environment Impact Assessments ERP Enterprise Resource Planning FDI Foreign Direct Investment FIC Foreign Investment Committee FT Federal Territory GCB Global Corruption Barometer GDP Gross domestic product

12-01 SHARED PROSPERITY VISION 2030 5 Glossary

GFCF Gross Fixed Capital Formation GIACC Global Infrastructure Anti-Corruption Centre GLCs Government-Linked Companies GNI Gross National Income GOS Gross Operating Surplus GST Goods and Services Tax HEIs Higher Education Institutions IMF International Monetary Fund ISID Inclusive and Sustainable Industrial Development IoT Internet of Things JAKIM Jabatan Kemajuan Islam Malaysia JPK Department of Skills Development KEGA Key Economic Growth Activities KPIs Key Performance Indicators KRI Key Result Indicators LFS Labour Force Survey MA63 Malaysia Agreement 1963 MACC Malaysia Anti-Corruption Commission MASA Institut Masa Depan Malaysia MDEC Malaysia Digital Economy Corporation MEA Ministry of Economic Affairs MIDA Malaysian Investment Development Authority MIGHT Malaysian Industry-Government Group for High Technology MNCs Multinational Corporations MSC Multimedia Super Corridor MTR 11MP Mid-Term Review of the Eleventh Malaysia Plan MPI Multidimensional Poverty Index MQA Malaysian Qualifications Agency

12-02 MYCC Malaysia Competition Commission NAPIC National Property Information Centre NCR Native Customary Rights NEM New Economic Model NEP New Economic Policy NGOs Non-Governmental Organisations OECD Organization for Economic Co-operation and Development PERODUA Perusahaan Otomobil Kedua PLI Poverty Line Income PLWS Productivity-Linked Wage System PROTON Perusahaan Otomobil Nasional PSDC Penang Skills Development Centre PWD Persons with Disabilities R&D Research and Development R&D&C&I Research, Development, Commercialisation and Innovation RE Renewable Energy SIA Social Impact Assessment SMEs Small and Medium Enterprises SOEs State-Owned Enterprises SST Sales and Service Tax T20 Top 20% Household Income Group TI Transparency International TLSM Transportation, Logistics and Sustainable Mobility TVET Technical and Vocational Education and Training UNICEF United Nations Children’s Fund UNIDO United Nations Industrial Development Organization VDP Vendor Development Programme

12-03 SHARED PROSPERITY VISION 2030 5 Glossary

METHODOLOGY

Shared Prosperity Vision 2030 is formed through comprehensive and consultative efforts, involving Malaysians from all walks of life. The process of developing this vision can be divided into two main phases. The first phase focussed on the assessment of socioeconomic conditions in Malaysia and the identification of priority issues for improvement. This phase was carried out by analysing domestic and international data, as well as consultative sessions held with industry experts, academicians, non-governmental organisations and stakeholders in the public and private sectors.

The second phase involved the development of a comprehensive socioeconomic development framework for 2021 to 2030, with emphasis on the concept of outcome-based policymaking. Careful study of various case studies, development models and mega trends are fundamental to the implementation of the second phase.

Shared Prosperity Vision 2030 as detailed through this document is the result of the implementation of both phases. The next phase of the implementation and improvement of this vision will be driven by feedbacks from the rakyat and discussions with relevant stakeholders.

STRUCTURE OF THE COMMITTEES OF SHARED PROSPERITY VISION

The Shared Prosperity Vision Committees have been in existence since July 2019 with the establishment of a Project Management Team led by Institut MASA and the Project Task Force representing the Ministry of Economic Affairs (MEA) responsible for the development and preparation of the Shared Prosperity Vision documents.

SHARED PROSPERITY VISION DEVELOPMENT TEAM

Members of the task force are:

Tan Sri Muhyiddin Yassin, Chairman of Shared Prosperity Vision Committee cum Chairman of Institut Masa Depan Malaysia

Encik Mohd Nizam Mahshar Project Director of Shared Prosperity Vision

12-04 EDITORS WRITER YB Dr. Radzi Jidin Encik Mohd Nizam Mahshar YBhg. Datuk Dr. Marzuki Mohamad Encik Ijlal Hannan Hafeedz Encik Mohd Nizam Mahshar

GROUPS OF EXPERTS, FELLOWS AND PANEL OF REVIEWERS AND EXAMINERS MASA ASSOCIATES YBhg. Tan Sri Ahmad Zaki Ansore Mohd Yusof YBrs. Dr. Wan Wardatul Amani Wan Salim YBhg. Tan Sri Nor Mohamed Yakcop YBrs. Dr. Muhammad Ikmal Mohd Said YBrs. Dr. Gairuzazmi Mat Ghani YBrs. Dr. Haniff Ahamat YBrs. Dr. Ahmad Faiza Mohammad Encik Adlan Abd Razak YBrs. Dr. Yunus Yassin Encik Wan Ahmad Fayhsal Wan Ahmad Kamal Encik Zamani Zakariah YBhg. Datuk Massuan bin Ahamad Encik Amir Farid Abdul Majid YBhg. Datuk Wan Mohd AlBakri Wan Md Noor Encik Yin Shao Loong Encik Sharizal Shaarani Encik Sayed Munawar Sayed Mustar YBhg. Datuk Dr. Awang Sariyan RESEARCHERS YBhg. Profesor Dr. Mansor Mohd. Noor Encik Erhanfadli Azrai YBhg. Profesor Dato' Dr. Ahmad Murad Bin Mohd Noor Encik Azlan Awang Merican YBrs. Dr. Rohana Kamaruddin Encik Fardan Abdul Majeed Encik Zouhair Mohd Rosli Encik Khalid Karim Puan Siti Saudah Nori Encik Aznul Abdullah Encik Amirul Hamza Abdullah Encik Razif Ghazali Encik Ijlal Hannan Hafeedz Encik Syamil Hamid Cik Fatihah Iliani Jamhari Encik Ahmad Yazid Othman Encik Mustaqim Yusof Encik Nurfitri Amir Bin Muhammad Puan Noorazilah Ishak YM Raja Nazarudin Raja Nasron Encik Shahrul Anuar Mahmod Encik Mustaqim Yusof PROJECT MANAGER Encik Danial Syahiran Ho Imran Ho YM Tunku Azela Tunku Aziz

12-05 SHARED PROSPERITY VISION 2030 5 Glossary

SHARED PROSPERITY VISION DOCUMENTATION MANAGEMENT TEAM

The Task Force team is responsible for looking into the consistency of the Shared Prosperity Vision documents as the country’s new direction for the period of 2021-2030.

Members of the Task Force Team are:

MAIN COMMITTEE CONSISTENCY AND EDITORIAL YBhg. Dato’ Saiful Anuar bin Lebai Hussen COMMITTEE (MALAY) -Secretary General YBhg. Dato’ Dr. Rujhan bin Mustafa YBrs. Puan Zakiah Jaafar Encik Mohd. Zulkifli bin Harun -Deputy Secretary General (Macro) Puan Noraini binti Ahmad YBhg. Dato’ Dr. Noor Zari bin Hamat Puan Raudatil Jannah binti Abdul Wahab Zen -Deputy Secretary General (Policy) Puan Zaeidah binti Mohamed Esa Encik Azhar bin Noraini Encik Luqman bin Ahmad -Acting Deputy Secretary General (Sectoral) Sr. Awatif binti Abdul Ghaffar Encik Boniface Anak Edwin Manung Puan Norzie Fariza binti Suid -Senior Undersecretary (Management) Puan Muazlinda binti Mutalib Equity Development Division Puan Maisarah binti Saman Institut Masa Depan Malaysia Puan Nur Shahidah binti Chia Abdullah Puan Avelia binti Othman Cik Asmawati binti Ali Puan Zaity Zalina binti Razali

CONSISTENCY AND EDITORIAL PRINTING COMMITTEE COMMITTEE (ENGLISH) YBrs. Dr. Mohd Shaharin bin Umar YBhg. Dato’ V Valluvan Veloo YBrs. Dr. Faiz bin Abdullah Encik Azlan Bin Abdul Rashid YM Engku Zakir Hussein bin Syed Abdullah Encik Roslan bin Ibrahim Puan Hidah binti Misran Puan Prema Nair Suppariam Encik Abu Zeid Mohd Arif YBrs. Dr. Ting Kok Onn Encik Mohd Fauzi bin Mustafa Cik Tan Wie Nie Encik Sabar bin Md Hashim Puan Amutham Subramaniam Puan Alim anak Jihen Encik Radin Shah Izuan bin Radin Mohd Hambali Encik Jeffery bin Yahya Puan Nurul Atiqah Muhammad Yusoff Encik Aszmy Mahmood Yusof bin Mohamed Puan Salina Samsudin Puan Azura Azreen binti Yusof Puan Ayu Shahiza Shahidan Encik Hirman Miraj bin Mohd Noor Encik Noorhidayat Salman Puan Normaya binti Nordin Encik Md Noor bin Md Isa Puan Amirthavalli a/p A.V. Muthiah Encik Taufik bin Ahmad Encik Muhammad Fareez bin Jamali Encik Muhamad Radzillah bin Abdullah 12-06